Source: Beijing Business Today
Amidst the launch of 2027's "Red Opening" campaign, a regulatory review and rectification has begun for life insurance "quick-return" products. On 10 month 12, Beijing Business Today learned that some life insurers recently received the Notice on Carrying Out a Review and Rectification of "Quick-Return" Products (hereinafter referred to as the "Notice") issued by the regulatory authority. The notice states that certain companies in the industry have developed "quick-return" products such as ordinary and participating endowment insurance with a payment period of 3 years and an insurance period of 6 years (i.e., "pay 3, insure 6") through bancassurance channels, which pose risks of treating long-term policies as short-term. It requires that, in principle, insurers shall not file new applications for products where the cash value at the end of the third policy year exceeds the premiums paid. For existing products with similar issues, they should be proactively discontinued.
What is "long-term insurance sold as short-term"? How has the rectification progressed? Where do the risks and root causes lie? Why did regulators intervene precisely as the "Red Opening" campaign launched? Addressing market concerns, Beijing Business Today reporters visited multiple bank branches in Beijing for on-site research. They found that most non-compliant products have been urgently delisted, adding uncertainty to the ongoing "Red Opening." However, a few non-compliant products remain on sale.
Verified: Named products still on sale
As the "Red Opening" period begins, the insurance sector faces a regulatory blow. According to a notice obtained by Beijing Business Today from industry sources, some companies have developed "fast-return" products—including ordinary and participating endowment policies with premium payment terms of 3 years and coverage periods of 6 years via bancassurance channels. These products deliberately understate actuarial expense assumptions and feature short cash value payback periods, driving scale at the risk of treating long-term insurance as short-term business.
The issues have been identified, and rectification requirements are now clear. The Notice states that, in principle, companies shall not file new products where the cash value at the end of the 3th policy year exceeds the total premiums paid. For existing filed products with similar issues, companies should proactively suspend sales. Companies facing liquidity difficulties must comprehensively assess their liquidity gaps, develop sound cleanup and compliance plans, and coordinate with regulators. In line with the "spend according to revenue" principle, they must strictly control business volume and establish a deadline for suspending product sales as part of the rectification process.
What is the current progress of the industry rectification? On 10 month 13, Beijing Business Today reporters visited 10 bank branches in Beijing, including state-owned banks, joint-stock banks, city commercial banks, and rural commercial banks. The majority of relationship managers at these branches stated that "pay 3, insure 6" two-part insurance policies with a three-year principal return (where the cash value exceeds the premiums paid) are no longer available.
What is the current form of available products? During our survey, several bank relationship managers recommended multiple "Jiao3Bao6" two-endowment insurance products to Beijing Commercial Daily reporters, which offer principal return after 4 or 5 years.
Specifically, when bank relationship managers recommended "pay 3, insure 6" products to Beijing Business Today reporters, the Jinwenying G Whole Life Insurance (Participating) underwritten by a listed insurer guaranteed principal return within 4 years for the guaranteed portion (excluding dividends). The Yingtianyue (Xinxiang Edition) Whole Life Insurance underwritten by a top life insurer achieved a cash value exceeding total premiums paid by policy year 4. Additionally, the Hongying 1 No. (Celebration Edition) Whole Life Insurance (Participating) from a mid-sized insurer and the Ruiyngbao Whole Life Insurance (Participating) from another mid-sized insurer both offered principal returns in 3 years, assuming projected dividend performance.
However, some products still slip through the cracks. At a branch of a major state-owned bank, a relationship manager told Beijing Commercial Daily that two-endowment insurance products like "pay 3, insure for 6, break even in 3 years" have largely been discontinued. The only on-shelf product at this branch meeting the criteria is Zhonghui Life's Huixiangfu Two-Endowment Insurance (Dividend Type), which offers a 3-year break-even period excluding dividends.
Based on the calculation table provided by the account manager, Beijing Business Today noted that for a 28-year-old female paying 5 million yuan annually for 3 years, the guaranteed cash value in the third policy year is 151800 yuan, exceeding the total premium of 150000 yuan.
Long-term insurance sold short may pose liquidity risks.
When ordinary consumers see the relevant "Notice," they often wonder: the sooner the cash value catches up with the premiums paid, the lower the financial cost of surrendering the policy mid-term. For this reason, such products are easier for customers to understand and accept when sold at bank branches. So why does regulation draw a clear line, prohibiting short-selling long-term insurance?
Yang Zeyun, a finance lecturer at the School of Business, Beijing Union University, explained that "short-term selling of long-term insurance" essentially involves designing or marketing an insurance contract intended for long-term holding as a quasi-wealth management product with short withdrawal periods. While this may appear to be merely a difference in holding duration, the core issue lies in using unrealistic actuarial assumptions to disguise insurers' long-term liabilities as short-term guaranteed products.
"Short-term selling of long-term insurance policies undermines insurers' long-term stable operations, often leading to a mismatch between premium income and the duration of investment assets, which can create liquidity risks. Yang Zeyun noted that this practice first intensifies insurers' term-matching pressures by causing liability cash flows to exit prematurely, making it difficult for asset portfolios to find matching instruments and exacerbating duration mismatches. Second, it increases the complexity of cash flow matching: cash flows originally scheduled to mature in six years may be withdrawn after just three years due to short-term profit-taking, resulting in earlier outflows."
Long Ge, co-founder and general manager of Zhongtuo Bang, added that insurance products offering "pay 3, get 6 back in the second year" have a liability side fundamentally characterized by short-term capital. However, their asset side must be allocated to long-term fixed-income and non-standard assets to honor guaranteed returns, creating an inherent maturity mismatch between short funds and long-term investments. A surge in mass surrenders could easily trigger liquidity pressure for the company. With market reinvestment yields continuing to decline and returns on non-standard assets shrinking, genuine investment income alone is unlikely to cover the guaranteed returns promised in policies. In the long run, this scenario not only risks loss from interest rate spreads but may also compound liquidity risks.
Precision corrections before the "Red Opening"
"Short-term selling of long-term insurance products is not new in the industry. In 2017, the former China Insurance Regulatory Commission issued the "Notice on Standardizing Product Development and Design Practices of Life Insurance Companies," commonly known as Document No. 134. It stipulates that for endowment and annuity insurance products, the first survival benefit payment must occur no earlier than 5 years after policy issuance, and annual payments or partial withdrawals must not exceed 20% of the total premiums paid."
The regulatory red line against "long-term insurance sold as short-term" has long been drawn. Yet products promising "pay 3, get 6 coverage, break even in 3 years" are resurfacing. Why these old issues are re-emerging warrants close scrutiny. Long Ge admits that Document No. 134 only blocked the path of early survival benefit payouts. The current approach prevents early survival benefits but instead accelerates cash value growth, allowing policyholders to recover their premiums upon surrender by year three.
Longge also noted that bancassurance customers seek stable products akin to deposits with early withdrawal options; banks aim to boost fee-based income; and smaller insurers, whose individual agency channels are weak, urgently need to grow premium volumes. Consequently, endowment policies structured as "pay for 3 years, cover for 6 years" became the go-to product for scaling up premiums.
"The resurgence of 'short-term selling of long-term insurance' stems fundamentally from insurers' continued prioritization of premium volume—a core internal driver. Externally, declining interest rates and the renewed emphasis on bancassurance channels, which favor such quick-turnaround products, have also contributed," Yang Zeyun concluded.
As required by the Notice, all companies must conduct thorough product self-inspections and strictly implement "reporting and execution consistency" requirements. Key focus areas include verifying the scientific soundness and reasonableness of actuarial assumptions—such as surrender rates and expense ratios—for existing products. Additionally, companies must fully assess cash flow pressures on relevant products under interest rate volatility scenarios in both directions. For companies that blindly pursue scale growth and trigger vicious market competition, regulatory authorities will enforce supervisory measures—including regulatory interviews, orders to rectify, suspension of product filings, and administrative penalties—in accordance with the law, to safeguard fair market competition.
The regulator's timing of intervention at the launch of the "New Year Kickoff" is not coincidental but a strategic move to prevent risks from escalating during the high-volume sales phase. Yang Zeyun notes that this regulatory action serves three key purposes: first, to prevent insurers from misleading consumers with similar products during the campaign; second, to curb practices where insurers artificially lower declared expense rates while maintaining higher actual rates—a violation known as "reporting and execution mismatch"—thereby mitigating loss-from-expense risks; and third, to guard against concentrated surrender risks and liquidity risks arising from policies that appear long-term on paper but are effectively short-term in practice.
Beijing Business Today reporter Li Xiumei
