- 2024-09-18
- News
Insurance Battle for 2025 "New Year Boom"
The scheduled interest rate of life insurance has entered the "2 era". What are the new changes in the "good start" of the insurance industry in 2025?
Reporters learned through interviews that, so far, leading life insurance companies such as China Life, Ping An Life, New China Life, Taikang Life, and Taiping Life have successively launched their main products for the 2025 "opening red", competing to seize market share.
Compared with previous years, the insurance industry's 2025 "opening red" has started earlier, with the implementation of new accounting standards and the intensification of interest rate risk, leading insurance companies have generally increased the sales efforts of dividend insurance products.
Undoubtedly, this has put forward higher requirements for the life insurance industry's ability to explore customer needs. In the view of the interviewed, product competitiveness, agent sales ability, and channel coverage are all key factors for insurance companies to achieve the "good start".
Early start
There is a saying in the life insurance industry that "If the year starts well, the whole year will be good". The insurance preparation for the 2025 "opening red" has come a bit earlier. Reporters have noticed that some companies began to increase their staff in July 2024 to prepare for the battle, and some branches of leading insurance companies have held launch ceremonies since September. Since October, more and more insurance companies have joined this annual marketing "battle".
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"We have already met our full-year performance targets ahead of schedule as a result of the scheduled rate cut, and the pace of 'opening the door' is naturally ahead of schedule." A large insurance company provincial branch of the department manager told reporters.
At the beginning of Aug., it was required to lower the upper limit of the assumed interest rate of personal insurance products and the relevant liability reserve assessment interest rate in batches and stop the sales of products exceeding the upper limit.
Specifically, since Sept. 1, the upper limit of the assumed interest rate of the newly filed ordinary insurance products is 2.5%; since Oct. 1, the lower limit of the assumed interest rates of the newly filed participating insurance products is 2%; and the upper limit of the minimum guaranteed interest rate of the newly registered universal insurance products is 1.5%.
In the short term, the assumed interest rate switch will inevitably lead to market "speculation and suspension of sales" behavior. According to the data disclosed by the State Administration of Financial Supervision, in Aug. this year, the original insurance premium income of personal insurance companies was RMB310.2bn, with a YoY growth rate of 54.1%. Among the A-Shares listed personal insurance companies, New China Life Insurance and PICC Life reported original premium income of RMB18.408bn and RMB7.749bn respectively, with a YoY growth rate of 122% and 95% respectively.
"The rhythm of the 2025 'opening red' has been greatly advanced, on the one hand, because insurance companies are trying to seize market share, layout in advance, and strive for more customer resources; on the other hand, it is also because the market competition is fierce, and insurance companies need to demonstrate their competitiveness and vitality by starting early." Yang Fan, General Manager of Beijing Paipai Network Insurance Agency Co., Ltd., added.
In addition, according to the tradition of the "opening red" in previous years, insurance companies usually collect premiums in advance and then delay the policy to take effect on January 1 of the following year, to achieve high growth in the premium scale of the following year. In this way, there is a period between the insurance company's deduction and the consumer's protection taking effect, which is very easy to cause damage to consumer rights and interests.
In October 2023, it was not allowed to take the way of collecting premiums in advance by a large margin and designating the policy effective date of the following year for underwriting.
Therefore, since the end of 2023, the policy underwriting method during the "opening red" period has changed from "pre-collection" to "pre-recording", and the premium will be collected in January of the following year.
Kong Xiang, a non-bank financial analyst at Guoxin Securities, believes that the change in the underwriting method has driven the continuation of the industry's premium income in the first quarter. Affected by the industry's "opening red" factor, the premium income in January accounts for about 20% of the annual premium income, and the overall premium income in the first quarter accounts for about 40% of the annual premium income. "Considering the current industry's multifaceted needs for pension, medical care, health care, savings, etc., coupled with the initial effectiveness of channel and product reforms, it is expected that the premium income growth rate during the 2025 opening red period will be about 7% to 8%, corresponding to a new business value growth rate of 25%."
Dividend insurance becomes the main force
After the reduction of the scheduled interest rate of insurance products, the industry generally believes that the participating insurance products that adopt the "guaranteed + floating" income model are expected to become the focus of life insurance companies. This view has also been fully verified in the "open door" battlefield. Guaranty
From the perspective of product strategy, although the 2025 "opening red" products launched by various insurance companies are still mainly annuity insurance, life insurance, etc., these products have all added a dividend model, and floating return products have become mainstream.
According to the data statistics of the China Insurance industry association, from October 1 to November 25 this year, there were a total of 258 new life insurance products, including 110 dividend life insurance products, accounting for 42.6%; a total of 136 annuity insurance products were newly launched, including 45 dividend annuity insurance products, accounting for 33.1%.
Simply put, the income of dividend insurance is composed of two parts: one is the guaranteed income (i.e., the fixed return part), and the other is the dividend income, which is determined by the insurance company based on the business operation of the dividend insurance, and the actual dividends paid each year.
Some industry insiders pointed out to reporters that dividend insurance not only has guaranteed income, which can meet consumers' pursuit of the product's rigid payment attribute but also has dividend clauses, which can form a certain degree of income sharing and risk sharing with consumers.
"From the perspective of customer interests, dividend insurance provides guaranteed returns, and the risks undertaken by customers are not great. From the perspective of insurance companies, when the performance is good, more dividends can be given to customers; when the performance is not good, dividends can be appropriately reduced. By sharing some risks with customers, insurance companies can to some extent alleviate the interest rate risk." The above industry insiders said.
However, if dividend insurance wants to truly occupy the mainstream market, it still faces significant practical challenges. In the view of Luo Zuanhui, the chief analyst of non-bank finance at Shenwan Hongyuan, there is an essential difference between this round of product switching and the last round.
He pointed out that the last round of the main product switch from critical illness insurance to increased life insurance was a product structure adjustment driven by customer demand. Under the influence of the full implementation of the asset management new deal, the fluctuation of financial product net values, the decline of the investment attribute of the real estate industry, and other factors, customers' wealth management needs have rapidly shifted to increased life insurance with a rigid payment attribute, and some companies' last round of product switching was even driven by customer demand.
"On the contrary, this round of the main product switch from increased life insurance to long-term dividend insurance is essentially a liability structure adjustment driven by the insurance company's own operating needs." Luo Zuanhui further stated that under the influence of the external environment and customer demand, which have not undergone essential changes, the significant decline in the dividend realization rate of dividend insurance in 2023, and the continuous advancement of agent and bank insurance channel reforms, the difficulty of adjustment is significantly higher than the last round.
Yang Fan believes that at present, consumers' awareness and acceptance of dividend insurance are not high, and market education and publicity need to be further strengthened. At the same time, the investment return rate of dividend insurance is highly uncertain, and how to promote the orderly development of the company while maintaining customer interests is a practical challenge that insurance companies must face.
Xu Kang, the chief analyst of non-bank finance at Huachuang Securities, estimates that although the regulatory authorities encourage the development of long-term dividend insurance, and life insurance companies are also vigorously promoting the transformation to floating return products, dividend insurance has not yet been able to take over traditional insurance in the short term.
The model is controversial
The "opening red" marketing activity has existed for a long time, and the controversy has continued. The regulatory level has repeatedly released signals to downplay the "opening red" and pursue stable performance. Life insurance companies should aim at optimizing liability quality and improving development sustainability, scientifically formulate the company's annual budget, and prevent radical development and large inflows and outflows.
A North American actuary also told reporters that the "opening red" is a very traditional, sales-misleading, and potentially industry-negative form. As more and more calm and rational young people join the insurance industry, the "opening red" is destined to gradually exit the market.
However, the reality is that the premium income in the first quarter is still the "main event" of the whole year, and the sales inertia of many years has forced insurance companies to pay attention to the "opening red".
Data disclosed by the Financial Regulatory Authority shows that in the first quarter of 2023, the total original insurance premium income of life insurance was 1.58 trillion yuan, accounting for 42.1% of the annual premium of 3.76 trillion yuan. Among them, the premium income in January was as high as 873.2 billion yuan, accounting for 23.2% of the annual premium.
Jiang Han, a senior researcher at Pangu Think Tank, said that after the assumed interest rate was lowered, customers' income expectations for insurance products changed. Insurers need to stimulate customers' desire to buy with more attractive products and marketing strategies through "good start" activities to make up for the possible decline in demand caused by the assumed interest rate reduction. "As an annual sales feast for insurers,
'Good Start' is also of great significance for improving annual performance and boosting team morale." Jiang Han pointed out that, especially in the current market environment, insurers need to demonstrate their strength and market competitiveness through the "Good Start" activities to enhance customer confidence.
Yang Fan believes that adhering to the "Good Start" can maintain the heat and vitality of the industry and attract customers' attention and participation. However, he stressed that it is reasonable to downplay the "good start", which can avoid excessive competition in the market and urge insurers to pay more attention to the connotation and long-term value of products. Therefore, balancing the relationship between the two and finding a strategy suitable for the company's own development is the key.
"The essence of the 'good start' debate is that the industry should keep pace with the times." In the view of Chen Jia, an independent international strategy researcher, the insurance industry is facing profound transformation choices in various sectors, from strategic layout and business structure to human capital and marketing strategies. In particular, the reform calls for some traditional marketing routines and management models are getting higher and higher recently, and the relevant discussion of "good start" is a typical example.
He said that from the data feedback, the success of the "good start" has a significant positive pull on the overall business of insurance companies throughout the year, but its efficiency is indeed declining. This poses a "dilemma" for business managers: from the perspective of boosting morale and rejuvenating, reform is good for the traditional inefficient "good start"; however, there is no credible new model that can replace the "good start" model, and it is likely to backfire if it is blocked.
"In fact, for large and established insurance companies, tradition is a very important corporate culture, and its strategic value cannot be underestimated. The 'good start' model needs to keep pace with the times, innovate and improve in the new era and new conditions, and better serve the enterprise value and employee well-being. Without innovation and perfection, simply canceling the "good start" will not have any positive effect." Chen Jia stressed.
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