Source: Insurance Educators
According to multiple sources, regulators in several regions recently issued a notice titled "Notice on Conducting Investigation and Rectification of 'Quick Return' Products" to life insurance companies. The directive targets ordinary endowment insurance and participating endowment insurance products sold through bank channels that promise returns such as "pay for 3 years, insured for 6 years, break even in 3 years."
The logic behind these products is straightforward. Insurers set conservative actuarial expense assumptions during filing to boost the policy's cash value, ensuring it exceeds the total premiums paid by the end of policy year 3. Customers see "break-even in 3 years" and often compare it to bank fixed deposits or short-term bond funds.
These products are easy for bank tellers to explain, sell, and push for volume. However, the risk lies precisely here: although the insurance term is 6 years, funds may be withdrawn in bulk during year 3, creating "long-term insurance treated as short-term," asset-liability mismatches, and liquidity pressure.
This regulatory action does not impose a blanket ban on 3-year premium products. Instead, it establishes clear red lines: new filings for policies where the cash value at the end of the 3st policy year exceeds total premiums paid are generally prohibited. Existing products with similar issues should be proactively discontinued. Companies facing genuine liquidity challenges must assess funding gaps, adopt expenditure-based underwriting, strictly control scale, and adhere to set rectification deadlines.
Long Ge, co-founder and general manager of Zhongtuobang, stated that insurance products promising "pay 3, get 6 back in the second year" have a short-term liability structure. However, their assets must be allocated to long-term fixed-income and non-standard assets to deliver guaranteed returns on policies, inherently creating a maturity mismatch between short funds and long investments.
A surge in centralized surrender requests can quickly strain company liquidity. With declining market reinvestment returns and shrinking yields on non-standard assets, actual investment income alone is unlikely to cover the guaranteed returns promised to policyholders. Over the long term, this creates a risk of loss from interest rate mismatches and may compound liquidity risks.
Why is regulation intervening now? Timing is critical.
Life insurers are gearing up for the 2027 "New Year Kickoff," and bancassurance channels favor "short, flat, fast" products. If promotional claims like "3-year payback" spread unchecked during this period, it could increase surrender rates, widen loss margins on expense ratios, and inflate channel costs.
In fact, the 2017 document No. 134 long ago restricted early survival benefits for annuities and endowment policies. The industry later rephrased it as reduced survival benefits with higher cash values, but the essence remains: turning long-term insurance into short-term wealth management products.
This regulatory action aims to close the loophole allowing early repayment of cash value.
For insurers, the path to scaling via fast-return products is blocked, putting pressure on short-term premium growth. Bancassurance teams must also pivot their strategies.
For bank channels, sales pitches like "more cost-effective than deposits with a payback period of 3 years" will no longer be sustainable. For consumers, purchased policies do not automatically become void due to investigations and rectifications; contract rights and obligations continue to be enforced according to the policy terms.
