Reporter: He Kui
The Shanghai Securities News recently learned from industry sources that a relevant regulatory authority has issued the "Notice on Conducting Investigation and Rectification of 'Quick Return' Products" (hereinafter referred to as the "Notice"). The notice requires life insurance legal entities to investigate and rectify "Quick Return" products developed by certain companies through bancassurance channels, and strictly implement the relevant work requirements for "integration of reporting and execution."
The notice states that certain companies in the industry have deliberately underestimated actuarial expense assumptions for "quick-return" products, such as ordinary and participating endowment insurance with premium payment periods of 3 years and coverage periods of 6 years developed through bancassurance channels. These products feature short cash value return timelines and are used to boost scale, creating "long-term insurance sold as short-term" risks.
According to reporters, "quick-return" products refer to insurance policies where the cash value exceeds the premiums paid within a short period. Since consumers can recover their principal quickly, they tend to surrender the policies before maturity. A large-scale concentration of such surrenders can trigger liquidity crises for insurers.
Notification Requirements: In principle, companies shall not file new products whose cash value at the end of policy year 3 exceeds the total premiums paid. For existing products previously filed that have similar issues, companies should proactively discontinue sales. Companies facing genuine liquidity difficulties must conduct a comprehensive assessment of their liquidity gaps, develop appropriate cleanup and remediation plans, and coordinate with regulatory authorities. Adhering to the principle of "expenditure based on available resources," they must strictly control business volume and establish a deadline for product discontinuation and rectification.
To further solidify insurers' primary responsibility for product management, the notice specifies that regulators will take enforcement actions—including regulatory interviews, orders to rectify, suspension of product filings, and administrative penalties—against companies that blindly pursue scale and trigger vicious market competition. These measures aim to safeguard a fair and competitive market environment.
Zhao Ming, a professor of insurance at the Capital University of Economics and Business, told reporters that the core danger of "quick-return" products lies in creating liquidity mismatches and expense spread risks. These products artificially inflate cash values by lowering assumed filing expenses, allowing policies to "break even" as early as the end of year three. While this superficially caters to customer preferences, it effectively disguises long-term liabilities as short-term guaranteed-return products.
"When actual channel costs exceed the filed assumptions, it results in 'misalignment between reported and actual operations' and underwriting losses. Moreover, if policyholders surrender en masse, insurers face liquidity pressure," Zhao Ming stated. By halting "three-year principal return" products and prohibiting new filings where cash value exceeds premiums paid, regulators are cutting off insurers' path of trading risk for scale at the product design stage, thereby pushing liability-side operations back to their core purpose of providing protection.
Long Ge, Deputy Director of the Center for Innovation and Risk Management at the University of International Business and Economics, told reporters that "selling long-term policies as short-term products" is a longstanding industry issue. The root cause lies in the convergence of interests: insurers are evaluated on scale, banks seek fee income, and customers want early returns. In this context, some smaller insurers with weak individual sales channels have relied on bank distribution to boost volume by selling quick-return products. Under low interest rates, these faster-return products sell even better, causing the old problem to resurface under a new guise.
Mitigating the risk of "long-term insurance being sold as short-term" requires improvements in regulatory frameworks and a shift in insurers' business philosophy. "Insurers must move away from relying on short-payback products and sales tactics, instead leveraging investment capabilities and service strength to meet residents' long-term savings needs. Regulators should continue to strengthen verification of actuarial assumptions and enforce accountability under 'reporting and operations consistency,' ensuring that the cost of violating rules for scale exceeds any benefits. Only then can the recurrence of 'long-term insurance being sold as short-term' under channel pressure be prevented," said Zhao Ming.
