China orders life insurers to review quick-cash-value products
Chinese regulators have told life insurers to inspect quick-return insurance products sold through bancassurance channels, mainland media report. The move targets policies whose cash value exceeds premiums paid within a short period, which can trigger mass surrenders and liquidity risks. Insurers mu
Chinese regulators have ordered life insurers to inspect quick-return insurance products sold through bancassurance channels, in a move to step up oversight of the sector, according to mainland media reports.
These products typically feature insurance policies with a cash value that exceeds premiums paid within a short period of time, as insurers deliberately lower actuarial fee assumptions to inflate cash values, the reports said.
Because policyholders can break even quickly, they tend to surrender their policies before maturity. If a large volume of policyholders surrender their policies simultaneously, it could create a liquidity crisis for insurance companies, the reports added.
The notice said insurers must not make new filings for products where the cash value at the end of the third policy year exceeds the premiums paid. Companies also must proactively suspend sales of existing legacy products with similar issues.
The move is part of broader efforts by Chinese authorities to curb risky practices in the insurance industry, which has faced pressure from low interest rates and rising surrender rates in recent years.