Regulator issues endowment insurance regulation
Source: Asia Insurance Review | Jan 2020
The CBIRC has issued a regulation that stipulates that life insurers must ensure that the life protection period of endowment products is similar to that of the duration of the savings component.
The new regulation, titled ‘Notice on Relevant Issues Regarding the Regulation of Endowment Insurance Products’, states that insurers are to issue endowment insurance with a term of at least five years.
Endowment products with a term of 3-5 years
However, the notice also allows life insurance companies to design endowment products with an insurance period of 3-5 years. Restrictions though have been placed on this category of products so that it would not form the bulk of endowment insurance business. The notice indicates that CBIRC’s intention is for endowment plans of at least five years’ duration to be the main product category in the endowment class.
The restrictions on products with 3-5 years’ maturity include: the comprehensive solvency adequacy ratio of the insurer shall not be less than 120%. Where this condition is breached, the insurer has to sell endowment products with 3-5 year terms. The annual premiums of endowment products with a term of less than five years must not exceed 20% of the total annual premiums of endowment plans.
Pragmatic approach
Mr Zhu Junsheng, deputy director of the Insurance Research Office of the Development Research Centre of the State Council, told International Finance News that the Notice, by allowing a maturity period of 3-5 years, adopts a pragmatic approach that helps ease the cash flow pressure which some insurers face over the intermediate period.
One reason for the CBIRC’s caution over endowment plans that mature before five years is that most consumers regard endowment products as investment plans. The regulator has been pushing insurers to move towards protection insurance in a crackdown on risk in the industry. A
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