The wave of insurance "speculation and solding" has reappeared

■ Nie Guochun, reporter of this newspaper

"On the last day, savings insurance that locks in lifetime 3.5% compound interest will be removed one after another" and "3.5% compound interest products are really going to become a thing of the past"... Recently, the marketing copy of insurance products "removed" and "discontinued" has been brushed in the circle of friends.

This kind of behavior of inducing consumers to buy as soon as possible on the grounds that "products are about to be discontinued" is known in the insurance industry as "speculation and suspension". The reporter of "China Consumer News" noted that although the "speculation and suspension" behavior has always been prohibited by the regulator, after the "4.025% annuity insurance is removed", the wave of "speculation and suspension" of 3.5% compound interest products has risen again.

So, what is the cause of this "speculation and suspension"? Is 3.5% compounding really about to run out? For consumers, should they buy now?

A number of increased whole life insurance were removed from the shelves

"In the past two days, it has been bombarded with the removal news of various products, and some of them take 2 hours from reminder to removal, and it is too late to even remind customers to apply for insurance." Lili, an insurance agent, told the China Consumer Daily reporter that in the next few days, she is ready to work overtime to record orders.

The reporter's investigation found that the news of the removal of insurance products has recently brushed the screen in the circle of friends of salespeople, and the products of many insurance companies have been removed from the shelves in a concentrated manner. For example, from March 3, three annuity insurance products, including Evergrande Life's "Splendid Future", will be discontinued; On March 28, Hongkang Life's "Jinyu Mantang 3.3" increased whole life insurance and Kunlun Health's "Enjoy Year (Zengduo No. 31)" products were also announced to be removed.

From the perspective of the increased whole life insurance products that have been discontinued or are about to be discontinued, the yield of the products is very close to 3.5%, such as 3.48% and 3.49%. Lili told reporters that it will be difficult to buy products with this yield in the future, and now "getting on the car" is earned.

Guide the reduction of debt costs to stimulate sales

Why has the "hype stop" reappeared recently? Xu Yuchen, a partner and actuary at Shanghai Yuchun Business Consulting Company, said in an interview with China Consumer News that this is mainly related to a recent survey conducted by the China Banking and Insurance Regulatory Commission.

It is understood that on March 3, the Life Insurance Department of the China Banking and Insurance Regulatory Commission organized the Insurance Association of China and more than 23 life insurance companies to conduct research on the cost of liabilities, the matching of liabilities and assets, and the impact of reducing the interest rate of liability reserves on companies.

"A reduction in the rate of assessment of liability reserves will affect the predetermined interest rate at which the product is priced." Xu Yuchen said that according to the Notice on Further Improving the Actuarial System of Life Insurance, as long as the pricing interest rate of the product developed by an insurance company is not higher than the appraisal rate, it can be directly recorded, otherwise it needs to be submitted for regulatory approval. In practice, insurance companies usually do not offer pricing that exceeds the assessed interest rate set by the regulator. A reduction in the assessment rate for liability reserves means that the predetermined interest rate must be lowered.

Although whether and when to lower the assessment rate is still inconclusive, Soochow Securities Research Report believes that the long-term signal of regulatory guidance to reduce the cost of debt is worth paying attention to. With the gradual decline of the yield center of competing products such as bank deposits and wealth management products, in the future, the predetermined interest rate of insurance will follow the decline of the assessment rate.

The reporter noted that every time the regulatory policy is adjusted, some insurance companies will vigorously promote old products during this window period, and insurance salespeople hope to complete the sales tasks of the year through "speculation and suspension". "Guiding the reduction of debt costs will significantly stimulate product sales." Soochow Securities Research Report believes that the suspension of old products is inevitable.

Whether or not to insure "getting in" varies from person to person

From the suspension of the sale of annuity insurance with a predetermined interest rate of 4.025% to the removal of financial insurance with a predetermined interest rate of 3.5%, should consumers hurry up to "get on the car" to apply for insurance in the context of the continuous decline of market interest rates?

In Xu Yuchen's view, if the scheduled interest rate is lowered from 3.5%, the overall income of the insurance policy will inevitably decline. In particular, products with low protection functions and mainly financial returns, such as incremental whole life insurance, have been greatly affected. In this sense, some cost-effective products are informed to consumers before they are discontinued, which is beneficial to consumers to a certain extent. However, some products themselves are not cost-effective, and even insurance companies continue to sell them after claiming that the products are removed from the shelves, which may mislead consumers.

In fact, as early as last September, the China Actuaries Association issued a risk warning to consumers, saying that the large surrender loss in the early stage of increased whole life insurance is not "stable profit without loss", and insurance consumers should pay attention to whether it is in line with their expectations. According to incomplete statistics, if you surrender the policy in the first year after application, you will lose 9%-1% of the premium; If the policy is surrendered in the 10th year, the return is between about 60% and 20.2%.

In the investigation, the reporter found that some salespeople often compare the increased amount of whole life insurance products to wealth management products when publicizing, ignoring their protection functions and inducing insurance consumers to surrender the insurance halfway. This not only does not conform to the original intention of product design, but also exposes consumers to the risk of loss of revenue in the future and cannot achieve the expected investment effect. The China Actuaries Association also reminded that some insurance marketers are suspected of misleading publicity in the process of selling incremental whole life insurance products, and consumers should be vigilant.

Zhang Lin, director of the Institute of Actuarial Science and Risk of Hunan University, told China Consumer News that the price of life insurance products is not only related to the predetermined interest rate, but also related to the rate and mortality rate (disease incidence). A decrease in the scheduled interest rate cannot simply be understood as an increase in the price of a life insurance product or a decrease in income. For example, for products with the same predetermined interest rate, the overall insurance income may differ greatly due to the difference in the rate of the insurance company.

"For consumers, the focus on the product should also be on the service of the insurance company and its solvency." Zhang Lin said that consumers do not need to chase and buy when they are "speculating and stopping", or whether the product itself is suitable for them.

Insurance experts point out that discontinued products such as incremental whole life insurance have value as part of sound asset allocation, but many front-line personnel regard it as a "panacea" suitable for all customers, which is inappropriate. The first thing consumers need to configure is protection products, on this basis, they can purchase stable long-term savings life insurance products such as incremental whole life insurance and annuity insurance from the perspective of asset allocation. If the risk tolerance is better, you can also apply for floating income insurance products such as dividends, universal and investment-linked. In short, the protection function takes precedence, and the savings function depends on the individual's risk appetite.

● Reporter's Notes

Excessive "speculation and suspension" is short-sighted

In the face of the news that the regulator intends to reduce the assessment rate of liability reserves, some insurance companies and sales personnel intend to use the window period before the policy adjustment to vigorously promote old products and work hard to complete this year's tasks through the concept of "speculation and suspension". In the short term, insurers can increase premiums, salespeople can complete performance, and consumers can buy products with higher predetermined rates.

However, in the long run, it is better for insurance companies to stop selling without hype, because the cost of debt is decreasing. Moreover, "speculation and suspension" will make the insurance policy uneven, which is not conducive to the development of the back-end forecast interest rate, and it is difficult to ensure the stability of the company's long-term operation.

In fact, Chinese life insurance has historically experienced the threat of spread risk risk. In the early 90s, bank deposit rates once exceeded 10%, and insurance companies also launched long-term life insurance with a predetermined interest rate of 8%. But over the next 10 years, deposit rates fell all the way down to 2.25%, during which some life insurance company salespeople used the imminent discontinuation of products as a gimmick to sell a large number of high-interest policies. Relevant data show that during this period, China's life insurance industry accumulated interest rate loss of tens of billions of yuan, and there are still individual companies digesting the risk of interest margin loss in that year.

Therefore, the regulatory authorities have always taken a crackdown on the "speculation and suspension" behavior. In July 2022, the China Banking and Insurance Regulatory Commission (CBIRC) drafted the Measures for the Administration of Insurance Sales Practices (Draft for Comments), which prohibits speculation on sales suspension and price changes. The Draft Opinion proposes to announce the suspension of product sales and price adjustment, which is intended to require insurance companies to "say what they say" about whether products are discontinued, and also unify the publicity caliber of sales personnel.

In the reporter's view, the life insurance industry's "speculation and suspension of sales" and "price increase" are product-driven and a short-sighted behavior. At a time when the industry is moving towards digital transformation, only by basing on the two-wheel drive of guarantee, products and services can it be stable and far-reaching. For consumers, they should also remain calm in the face of "speculation and suspension" information, buy according to their own needs, and do not blindly "get on the car".

(Nie Guochun, China Consumer Daily)