Source: Insurance Experts
According to media reports, the Financial Regulatory Administration has ordered life insurance companies to conduct a review and rectification of "fast-return" products.
Regulators are correcting course on "fast-return" life insurance products.
Recently, media reports indicate that the Financial Regulatory Administration has ordered life insurance companies to investigate and rectify "quick-return" products. Specifically, the Shanghai Financial Regulatory Administration issued a notice titled "Notice on Carrying Out Investigation and Rectification of 'Quick-Return' Products" (hereinafter referred to as the "Notice") to all life insurance companies under its jurisdiction.
The Notice points out that certain companies in the industry have developed "quick-return" products, such as ordinary and participating endowment insurance with a premium payment period of 3 years and an insurance term of 6 years through bancassurance channels. These products artificially suppress actuarial expense assumptions and feature very short cash value refund periods to drive sales volume, creating risks associated with treating long-term insurance as short-term business ("long-insurance-short-acting").
The "Notice" establishes red lines primarily centered on cash value. In principle, insurers must not file new products where the cash value at the end of policy year 3 exceeds the total premiums paid. For existing products with similar issues that were previously filed, insurers should proactively discontinue sales. Insurers facing genuine liquidity constraints must comprehensively assess their liquidity gaps, develop a cleanup and compliance plan, and coordinate with regulators. Business scale must be strictly controlled based on the principle of "spending according to income," and a deadline for product discontinuation and rectification must be set.
The Notice also requires companies to conduct product self-inspections, strictly implement the "reporting and execution consistency" principle, and focus on verifying the scientific rigor and rationality of actuarial assumptions for existing products—such as surrender rates and expense ratios—and to stress-test cash flow pressures under bidirectional interest rate fluctuation scenarios.
All companies have submitted their investigation reports by the end of business on 10/12 (Monday). For "quick-return" products, a breakdown of the cash value refund timeline and a rectification plan must also be provided.
In the days following the issuance of the Notice, most of the ten bank branches in Beijing no longer offer "pay 3, insure 6" or two-year return-of-premium endowment insurance products. Current products typically have a return period of 4 years or 5 years. However, according to media reports, one branch of a major state-owned bank still sells a participating endowment product. Without considering dividends, the guaranteed cash value exceeds the total premiums paid by the end of policy year 3. Based on an annual premium of 5 million yuan for a female aged 28, paid over 3 years, the guaranteed cash value at the end of year 3 is 151800 yuan, exceeding the total premium of 15 million yuan. Existing policyholders are unaffected; their rights and obligations remain governed by the contract terms.
The hallmark of a "Quick Return" plan is that the policy's cash value exceeds the total premiums paid by the end of policy year 3. The market describes this simply as: "Pay for 3 years, coverage for 6, break even in 3 years." Surrendering in year 3 preserves your principal, while surrendering in year 5 typically yields expected returns. This makes it much easier to explain than a "6-year hold" requirement when selling at bank branches.
From multiple perspectives, the root cause of "long-term insurance sold as short-term" lies in aligned interests among three parties: insurers seek scale targets, banks aim for commission income, and customers desire quick principal repayment. For smaller insurers with weak individual agency channels, selling "short, simple, fast" products via bancassurance is key to volume growth. In a low-interest-rate environment, products with faster return-to-principal periods sell better.
In fact, "quick-return" products are not a new species; they were standardized over a decade ago. In 2017, the "Notice on Regulating Product Development and Design Behaviors of Personal Life Insurance Companies" stipulated that for endowment and annuity insurance, the first survival benefit payment must be made after the policy has been in effect for at least 5 years, with annual payments or partial withdrawals capped at 20% of premiums paid. Earlier still, the 2016 "Notice on Matters Concerning the Regulation of Medium- and Short-Term Life Insurance Products" required immediate discontinuation of medium- and short-term products with a term under 1 years, and mandated a gradual reduction in sales volume over three years for those with terms between 1 and 3 years.
Unlike a decade ago, the resurgence of "quick-return" strategies today is driven by shifting dynamics in the bancassurance channel. Cost controls have just tightened: effective 2026 year 7 month 1, the "Notice on Further Strengthening Expense Management for Bank Agency Channels" (Jin Xiu Lian Han [Year 2026] No. 65, hereinafter referred to as "Document No. 65") was implemented, requiring separate reporting of four expense categories: commissions, bancassurance specialist compensation and incentives, training and customer service fees, and allocated fixed costs. According to industry exchange data, new premium income in the bancassurance channel declined year-over-year by 60% in 7 month and 71% in 8 month, before rebounding in 9 month against a low base, posting an 270.7% year-over-year growth for that single month. Earlier still, the "reporting and execution alignment" initiative launched in the bancassurance channel in 2023 year 8 month, leading to reduced commission rates and improved value ratios, restoring bancassurance as the largest channel for individual life insurance.
Under performance pressure, "fast-return" products are once again being used as volume drivers. In 2027, the preparation for the "New Year Kickoff" coincided with a rectification window; short-term savings products have traditionally been the mainstay of bancassurance channels. While they drive rapid scale growth, they also accelerate risk accumulation: liabilities are predominantly short-term, yet assets must be allocated to long-duration fixed-income and non-standard instruments to meet policyholder returns. If concentrated surrenders occur, the mismatch between short funds and long-term investments ("short money, long investment") will strain corporate cash flow. On pricing, some products artificially boost cash values by underestimating filing expense assumptions while actual channel expenses exceed those assumptions—creating "misalignment between filed and actual practices" and expense losses. At the sales level, claims like "3-year payback" blur the distinction between insurance, deposits, and short-term wealth management products. In essence, these products effectively repackage long-term liabilities as short-term offerings.
This Notice differs from previous regulatory rounds. Earlier efforts focused on survival benefit payments, product terms, and channel fees. This round specifically targets the cash value refund timeline, expanding oversight to include not only fee transparency but also the rationality of product design. The Notice retains flexibility: companies facing genuine liquidity challenges may consult with regulators to rectify issues in line with the principle of "expenditure based on income." Industry experts note that the regulator's objective is to prevent firms from competing for short-term scale through overly aggressive product designs. Reasonable customer demands for fund liquidity and return timelines remain fully recognized.
At the same time, requirements for actuarial assumption management have increased. In accordance with regulations such as the Notice on Strengthening Actuarial Assumption Management in Life Insurance Companies (Jin Ban Bian Han [ 2026 ] No. 616, hereinafter referred to as "Document No. 616"), companies must enhance the integrity of key actuarial assumptions, including expense ratios, mortality rates, lapse rates, and investment return rates. Document No. 616 also requires companies to conduct at least one retrospective analysis annually, establish quantitative adjustment rules for actuarial assumptions, and include a special report on actuarial assumption management in their annual actuarial reports, signed by the Chief Executive Officer, Chief Actuary, and Head of Finance.
According to industry insiders from insurance companies' bancassurance channels, the impact of the Notice varies by company. Large insurers with diverse product portfolios can meet customer demand using other savings-type products. However, smaller insurers that rely on quick-return products to drive bancassurance volume face short-term pressure to switch products and adjust sales pacing. "Pay 3, insure for 6, return at maturity" endowment products are concentrated in only a few companies. For most participating endowment policies on the market, even when calculated using the highest dividend illustration level, the return-to-principal date occurs no earlier than year 4.
A decade ago, regulators closed the loophole on "early return of survival benefits"; a decade later, they targeted "early recovery of cash value." Both moves aimed to curb the practice of treating long-term insurance as short-term products. Since the rectification began, competition in bancassurance channels around "speed of break-even" has narrowed. Product comparisons have returned to assessing capabilities in long-term savings and pension protection. For insurers reliant on short-term products to drive volume, the constraint of "revenue based on actual output" is now codified—strategies that relied on "3-year break-even" claims to boost scale are no longer sustainable.
