Interface News Reporter | Lu Wenqi
As the 2027 insurance "New Year Kickoff" preparation phase begins, a category of life insurance products marketed on a "three-year payback" promise is facing regulatory crackdowns.
Recently, financial regulatory authorities in multiple regions have required life insurance companies to conduct investigations and rectifications on "quick-return" products. In principle, new filings for products with cash values exceeding paid premiums by the end of the third policy year are not permitted. Existing products with similar issues should be proactively discontinued.
This regulatory crackdown coincides with a critical period as life insurers prepare for the upcoming fiscal year. In recent years, as bancassurance has become a major source of premiums in the life insurance industry, products like "three-year payback" have been used by some insurers to compete for bank customers and drive premium growth due to their relatively short capital recovery cycles. The impending discontinuation of these products introduces uncertainty into the upcoming "2027" year "New Year's Kickoff."
"Three-Year Payback" Products Face Regulatory Crackdown
According to reports, this inspection and rectification primarily targets products such as ordinary and participating endowment insurance developed by certain companies in the bancassurance channel, with premium payment periods of 3 years and coverage periods of 6 years.
Regulators have found that some insurers artificially lower actuarial expense assumptions and shorten the time to return cash value on policies, using these tactics to boost premium volumes. This practice poses a "long-term insurance sold as short-term" risk.
The term "break-even in three years" does not mean the insurer automatically returns the principal in the third year. It means that by the end of the third policy year, the policy's cash value exceeds the total premiums paid. If the policyholder surrenders the policy at that time, they can recover their paid premiums through the cash value.
For consumers, a shorter payback period means lower potential financial loss if they exit the insurance contract early, making it easier to understand and accept when sold at bank branches.
However, this product design carries inherent risks. A representative from an insurance company's bancassurance channel told Interface News that some insurers front-load cash values to boost sales appeal, effectively trading future operational space for current premium volume. If policyholders surrender policies en masse in a short period, it could strain the insurer's cash flow management. This regulatory crackdown aims to prevent insurers from engaging in scale-driven competition through unreasonable product designs.
Wang Guojun, a professor at the School of Insurance and Social Security of the University of International Business and Economics, told Interface News that this regulatory action does not impose a blanket ban on 3-year premium payment products. The core focus is to restrict fast-return products whose cash value at the end of the third policy year exceeds the total premiums paid. This aims to curb the practice of "treating long-term insurance as short-term," prevent excessive financialization of insurance, and mitigate liquidity risks arising from concentrated surrenders and asset-liability mismatches.
Regulatory notices require insurers to strengthen the management of the authenticity of actuarial assumptions, including expense ratios, surrender rates, and investment yields, while conducting a comprehensive review of existing products. For companies facing genuine liquidity challenges, a liquidity gap assessment must be performed, a cleanup and standardization plan developed, and rectification deadlines clearly established.
With the New Year sales season approaching, bancassurance channels face product adjustments.
Notably, this inspection and rectification occurs during the critical window when insurers are preparing for their 2027 year "Red Start" campaign.
In fact, since 2026, the growth of new business in the life insurance sector has faced significant headwinds. Particularly in the second half of the year, influenced by high base effects from the same period last year and the deepening implementation of the "reporting and execution integration" policy for bancassurance channels, some insurers experienced substantial fluctuations in new premium income. Amidst this pressure on full-year premium growth, insurers must not only wrap up year-end operations but also prepare products and customer resources for the strong start to 2027.
For bancassurance channels, a product's ability to meet customers' liquidity needs is a key factor influencing sales. In recent years, as deposit rates have continued to decline, savings-oriented insurance products have gained attention among bank customers. Unlike bank deposits, insurance policies typically require a longer holding period, and early surrender may result in losses. Consequently, selling points like "break-even in three years" have proven effective at certain bank branches.
This regulatory requirement may alter the sales strategy.
A representative from the bancassurance channel of a major insurer stated, "For large insurers with a robust product portfolio, customer demand can be met through other savings-oriented insurance products, resulting in limited overall impact. However, for some smaller insurers that rely heavily on quick-return products to drive bancassurance growth, they may face short-term pressure related to product transitions and adjustments to sales timelines."
Wang Guojun believes that the inspection and rectification of fast-return products will drive a structural correction in the bancassurance market. While deposit migration continues, residents' long-term savings demand remains strong. Market competition will shift from racing to offer faster returns to competing on investment capabilities and service quality. At the same time, risks of sales disputes arising from unmet customer expectations must be managed by ensuring a smooth transition between old and new products. This approach will help turn the "Red Opening" season from a scale-driven frenzy into value-focused growth, returning insurance to its core purpose of long-term savings and retirement protection.
