Industry sources report that multiple local financial regulatory bureaus have recently ordered life insurance companies to investigate and rectify "quick-return" products, aiming to prevent disorderly competition and steer industry development toward a value- and profitability-driven model.
Specifically, the Shanghai Financial Regulatory Bureau recently issued a notice (hereinafter referred to as "the Notice") to life insurance companies under its jurisdiction titled "Notice on Conducting Investigations and Rectifications of 'Quick Return' Products." The Notice points out that during a recent regulatory review of products, it was discovered that certain insurers in the industry have deliberately lowered actuarial expense assumptions for "quick return" products—such as ordinary and participating endowment insurance with payment terms of 3 years and coverage periods of 6 years developed through bank insurance channels. These products feature rapid cash value returns and are being used to artificially inflate sales volume, posing risks associated with treating long-term policies as short-term products.
Long Ge, Deputy Director of the Center for Innovation and Risk Management at the University of International Business and Economics, told Securities Daily that some insurers are launching "fast-return" products primarily to cater to customers' preference for early principal repayment. The core risk in such business is liquidity mismatch; when the cash value exceeds premiums paid by the end of year 3, it can trigger mass surrenders. Additionally, artificially suppressing actuarial expense assumptions creates disordered competition where reported practices diverge from actual operations, deviating from the fundamental purpose of insurance and increasing the risk of misleading sales that equate insurance products with deposit-like instruments.
According to Xu Yuchen, a founding member of the China Association of Actuaries, the surface reason insurers develop "fast-return" products is that they are easier to sell through bancassurance channels. Phrases like "3 years to break even" are more understandable and acceptable to consumers; longer terms may reduce customers' willingness to buy. The deeper reason lies in some insurers' drive for scale, pushing against the "reporting and execution alignment" rules to boost premium volume. Some deliberately lower actuarial expense assumptions in filings to inflate cash values. If actual channel expenses exceed these filed assumptions, it violates "reporting and execution alignment" and increases the company's expense variance loss risk.
The Notice proposes that, to further solidify insurers' primary responsibility for product management, genuinely shift their business philosophy, and prevent disorderly competition, insurers must strictly adhere to regulatory requirements. They should enhance the integrity of actuarial assumptions—including expense ratios, surrender rates, and investment yields—while abandoning the impulse and orientation toward sheer scale. Insurers must accelerate their transition from pursuing speed and volume to focusing on value and profitability.
Additionally, the Notice stipulates that insurance companies should, in principle, not file new products where the cash value at the end of policy year 3 exceeds the premiums paid. For existing products already filed that have similar issues, they should be voluntarily discontinued. Companies facing liquidity difficulties must comprehensively assess their liquidity gaps, develop a proper cleanup and rectification plan, and coordinate with regulatory authorities. In line with the principle of "expenditure based on income," they must strictly control business scale and set deadlines for product discontinuation and rectification.
The Notice also requires all insurance companies to conduct thorough self-inspections of their products and strictly implement the "integration of reporting and execution" requirements. Key areas of focus include verifying the scientific soundness and rationality of actuarial assumptions for existing products, such as surrender rates and expense ratios. Additionally, companies must fully assess cash flow pressures under scenarios involving two-way interest rate fluctuations. For insurers that blindly pursue scale growth and trigger vicious market competition, regulatory authorities will take enforcement actions in accordance with the law—including supervisory interviews, orders to rectify, suspension of product filings, and administrative penalties—to safeguard a fair and competitive market environment.
Currently, some insurers have already begun warming up for the 2027 year kickoff. Analysis of recent annual kickoffs shows that short-term products and bancassurance channels are the main drivers during this period. Recently, regulators launched investigations and rectifications on "quick-return" products in the bancassurance channel, which will have a certain impact. Fu Jian, Director of Henan Zejin Law Firm, told Securities Daily that strict regulation can curb the practice of "selling long-term policies as short-term ones," prevent systemic risks from accumulating in the industry, and avoid vicious competition among bancassurance channels over high-return short-term products. This may also help moderate the pace of the 2027 year kickoff for insurers and prevent them from deviating from proper conduct. He believes that while premium growth may slow down in the short term, this is beneficial for the industry's long-term healthy development.
In recent years, as market interest rates have continued to decline, the insurance industry has shifted its focus for new business sales toward participating policies. Bancassurance channels have gained increasing prominence, with most insurers now treating them as a core distribution channel. Developing bancassurance and enhancing its value is a key priority. According to Xu Yuchen, insurers can boost bancassurance value by focusing on three areas: At the product level, insurers should diversify their product offerings to meet consumer needs in retirement planning, education funding, and wealth succession—rather than positioning bancassurance products merely as "deposit substitutes." At the sales level, given the relative complexity of insurance products, insurers must strengthen training for bank staff to ensure clear product communication and prevent mis-selling. At the performance management level, insurers should refine their evaluation mechanisms for bancassurance, prioritizing metrics such as new business value ratio and customer satisfaction over sheer volume. This multi-pronged approach will help transform bancassurance from a simple sales conduit into a value-driven channel.
(Source: Securities Daily)
