Participating insurance is not a new thing, in fact, if you study the insurance in Hong Kong, the United States, Europe, Japan, Taiwan and other regions, you will find that in low-interest rate economies, participating insurance is the mainstream savings insurance.
Today we will make an elaboration on the participating insurance from the theoretical aspect of insurance, and in the next section we will select a few products to do analysis, theory + products will help you to take the essence of my participating insurance and choose the right product for yourself.
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1. Participating insurance is the mainstream of savings insurance in the future.
The definition given in the Interim Measures for the Administration of Participating Insurance is "a life insurance product in which an insurance company distributes its actual operating results to policyholders in a certain proportion compared to the surplus assumed by the pricing assumption." ”
The rate of return of participating insurance = fixed rate of return + rate of return on dividends.
A fixed interest is a fully determined interest written in a contract that is presented in the form of a cash value in the contract.
Bonus benefits, which are uncertain, are not written in the contract. The insurance company will determine the dividend distribution for the current year after a comprehensive assessment based on the operating conditions of the current year.
If it is given to us according to the dividend yield demonstrated when we are insured, the dividend fulfillment rate is 100% at this time, if the actual yield is only half of the demo, the dividend fulfillment rate at this time is 50%, and if the actual yield is only 15 times, the fulfillment ratio at this time is 150%.
It can be seen that the fulfillment ratio is very important
Fulfillment Ratio = Actual Dividend Yield Demo Dividend Yield
The insurance company shall, within 15 working days after the announcement of the annual dividend plan, disclose the dividend fulfillment ratio of each participating insurance product during the dividend period on the company's official **. Most insurance companies can go to the official website, and you can check the fulfillment ratio of dividends in the "Special Information" section of "Public Information Disclosure" and "New Products".
Why do you always choose dividend insurance in low-interest rate economies? This brings us to the issue of interest rate loss in the insurance industry.
Many long-term insurance policies of insurance companies span decades or even longer, and there is a strong degree of uncertainty. For example, if you buy an increased whole life for a newborn child, the predetermined interest rate is 35%, the child's life expectancy is 90 years old, then this policy locks in the interest rate for 90 years, a full 90 years.
So how is insurance priced? If you adopt a fixed type of product, the premium will be expensive, which will cause great damage to the interests of customers; If the premium is not enough, the company has to pay for it itself, and at this time, the insurance company and the customer are conflicting interests.
For example, the predetermined interest rate of Japan's life insurance industry in 2023 is 1%, and after deducting the non-expense rate, the actual rate of return is estimated to be 0Around 7%, such a product is obviously not competitive and cannot be sold. However, if the insurance industry adopts a higher predetermined interest rate, it is easy to accumulate huge interest rate loss risks when the investment environment is not good, and the industry will not survive.
Note: The minimum predetermined interest rate in the Japanese life insurance industry is only 025%。
Specific to China, before 1995, insurance companies could set their own predetermined interest rates, in order to strengthen the market with bank deposits and treasury bonds, the predetermined interest rate of many insurance companies was 8%, and when bank deposits fell below 2%, the insurance industry was dumbfounded.
On June 10, 1999, the China Insurance Regulatory Commission issued an Emergency Notice to adjust the scheduled interest rate to no more than 25%。In April 2000, China Life released its first participating insurance "Millennium Wealth Management", and then other insurance companies also launched participating insurance.
Participating insurance has gradually become the mainstream of life insurance products, accounting for as much as 77% in 2010.
In 2013, the former China Insurance Regulatory Commission changed the predetermined interest rate. Will have been used for more than 10 years 25% of the scheduled interest rate, raised to 35%, and 4 for partial annuity insurance025%。Fixed-yield products began to gradually expand their market share, and participating insurance continued to decline.
Note: From 1999 to 2013, many people who bought insurance said that they were cheated, on the grounds that the product yield was low and the insurance was expensive. In fact, this is not an insurance company, but the insurance regulatory commission stipulates that the predetermined interest rate is only 2, the product is definitely expensive, this 1Year 2In fact, it is to pay off the debt at a high predetermined interest rate for the previous four years. According to regulatory provisions, before 2005, the investment scope of insurance companies was concentrated in deposits (accounting for more than 50%) and bonds, and even treasury bonds could not be bought too much, and during the period of 2000-2004, the average income of the insurance industry was less than 3%. After 2005, insurance companies were finally allowed to invest**, and the rate of return of insurance companies gradually increased. By the 2007 bull market, the real rate of return of domestic mainstream dividend insurance even reached 8%. When we evaluate the rate of return of insurance products, we must stand in the specific historical context of the time, and cannot simply compare products in different periods.
From 2013 to 2022, the era of higher predetermined interest rates in China, coupled with the fact that many private enterprises have joined the insurance and started the first war, the internal rate of return (IRR, compound interest) of many savings insurance even exceeds 38%, as the economic situation changes, 4025% off the shelves, 35% will be removed from the shelves, and in 2024, the fixed yield of the vast majority of savings insurance will fall below 28% (20 years).
At this time, the dividend insurance must go out of the mountain.
The essence of participating insurance is a principal-guaranteed wealth management product, and its actual rate of return depends on both the fixed rate of return and the dividend rate of return.
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2. Don't be superstitious about Hong Kong's dividend insurance.
When it comes to participating insurance, we must say that Hong Kong's participating insurance, many fans who come to me to consult insurance often look down on New Year's products on the grounds of Hong Kong's high insurance yield. I wrote an article titled "What are we buying when we buy insurance in Hong Kong?" 》
Hong Kong's insurance is mainly participating insurance, and its rate of return is uncertain, and the so-called % is often a gimmick and an expected return, so can it be realized?
Just think about what assets the insurance company can invest in with the premium to get more than 6If you can ensure safety, never lose money, and can leave a part of your profits, you should be sober.
Insurance in Hong Kong, it can take about 70% of the funds to invest**, 30% of the funds to invest in bonds, equivalent to a hybrid **, if you make money, 80% to 90% of it is returned to the investor (policyholder), the insurance company bears the risk of investment loss (with a guaranteed interest rate), but also leave some investment income as their own profits, risk and return equal.
High Guarantee, Low Return, Low Guarantee, High Return, Returns are always equal to riskWe can understand mainland fixed income products as products with extremely high guaranteed yield + 0 floating yield. There is no difference between good and bad products themselves, and it depends on whether the attributes of the product match their own needs.
Buy insurance in Hong Kong, the salesman will not talk to you about the guaranteed return, generally talk about the expected return, and there is no internal rate of return. Be sure to talk about the expected returns.
To be honest, Hong Kong's insurance industry is now popular to brag, anyway, it is expected returns, since they are all non-guaranteed, of course you have to believe in a company with a better reputation, any company to tell you a non-guarantee, do you believe it? Now I think Hong Kong has gone astray now, and everyone is bragging. One is more radical than the other, and the probability is that it is impossible to achieve.
According to the historical data of Hong Kong, the best products are about 5% to 6%, and the mainstream products are 4% to 5%. Boasting to 7%, how can you do it for a long time?
Let's take a look at the long-term rate of return of Prudential participating insurance in Hong Kong, and choose Prudential because it is the only insurance company that is willing to disclose the actual dividends of all historical policies, the data is long enough, and the company is large and representative.
Historical rate of return Here, we find that the yield of products sold in different years varies greatly, and the yield of products issued when the US dollar interest rate is lower is also lower, and vice versa is higher, and the two years are exactly the time period when the US dollar interest rate is extremely high, so the expected return given by the insurance company is also higher.
You see, the expected revenue of the products sold by Prudential in the three years of 19 20 21 is significantly lower.
Then compare the yield of Prudential's products with the curve of change in China's predetermined interest rate, and you will find that before 1997, the profit of buying mainland insurance was crazy, and the predetermined interest rate was 4025% of the products are also a historical opportunity.
Here is a comparison of the participating insurance in Chinese mainland and the participating insurance in Hong Kong, the difference is that the guaranteed interest rate difference between the two places is huge.
Let's take a look at the dividend insurance in the mainland first, the interest part of the dividend insurance is composed of the floating part, and the pricing interest rate of the part is guaranteed not to exceed 25%, after deducting some fee costs, may be in 21%-2.4%. The floating portion is driven by dividends, and at the level of the demonstration, if a 100% fulfillment ratio is achieved, the floating portion of the return is at least 70% (45%-2.5）=1.4%。With the addition of the guaranteed part, the actual long-term IRR is at 35%-3.8% between.
Looking at Hong Kong's dividend insurance, the guaranteed interest rate is very low, and the high yield mainly comes from the non-guaranteed interest rate, and whether it can achieve the expected income on the plan is closely related to the company's investment level. For some multi-currency insurance, the rate of return is 0 at 30 years33%, 0 at 100% per year52%。This also means that in some extreme cases, the income of Hong Kong insurance will be lower than that of demand deposits.
High guarantee, low return, low guarantee, high return, income is always equal to risk, here it depends on how consumers choose, but it is inappropriate to think that the mainland's dividend insurance is inferior to Hong Kong's dividend insurance.
What's more, now is the high point of US bonds, the high point of inflation, the yield of 5% minus the inflation rate of 3% The real purchasing power of money is only 2%, and the high point of US bonds may also be the high point of the exchange rate, and now it seems that the time of the highest yield, it may be the time when the risk is the highest.
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3. Understand some key points of participating insurance.
In February 2020, the "Notice on Matters Concerning the Strengthening of Actuarial Supervision of Life Insurance" issued by the regulator mentioned the demonstration rules for participating insuranceIt is clearly pointed out that the dividend distribution ratio is unified as:, and stipulates,It can only be demonstrated by spread.
Now the demo earnings have been adjusted to two gears.
The first level is 0, which is the worst, and you can only get guaranteed returns;
There is also a gear that is 45% minus the predetermined interest rate of the product.
In addition, the Notice issued at the end of 2022 also requires insurance companies to disclose the "fulfillment ratio" for the past few years on their official websites, which will be officially implemented at the end of June 2023. Before we buy a product, we can check the historical fulfillment ratios of other products sold by the insurance company and the target product.
We can judge how well the insurance company performed and whether it fulfilled its promise based on the dividend achievement rate announced by the insurance company; It can also be judged according to the investment ability of the insurance company whether the insurance company has the ability to realize dividend insurance in the future.
In the era of fixed-rate products, we can choose products with our heads covered, and the credibility of the products is the same, but in the era of dividend insurance, the investment ability and dividend reputation of insurance companies are very, very, very important.
In terms of the choice of specific companies, large companies are relatively more stable in investment, and small and medium-sized insurance companies are relatively flexible, which may be more volatile and have higher potential returns. Each has its own advantages and disadvantages, so choose according to your own situation.
When it comes to the income of participating insurance, let's calculate it in detail.
The current predetermined interest rate for the increased whole life of a fixed income is 30%, the predetermined interest rate for the fixed part of the participating insurance is 25%。The predetermined interest rate for the fixed + dividend as a whole is currently up to 45%, the state stipulates that the proportion of the actual distribution of earnings by insurance companies to policyholders in each fiscal year shall not be less than 70% of the total distributable earnings of that year.
Assuming that the fulfillment ratio is x, let's calculate how much the overall predetermined interest rate of the participating insurance can reach 3%?
2.5%+（4.5%-2.5%）*70%*x=3%
This gives x=357%
That is, when the fulfillment ratio reaches 35At 7%, as long as the time is long enough, the overall rate of return of participating insurance can catch up with the current 30% predetermined interest rate for incremental whole life. 35.A fulfillment ratio of 7% is not very difficult for insurers.
Note: The actual fixed interest rate is not up to 25%, I judge that the fulfillment ratio of 50% can reach 3% in the long run, and if the fixed interest rate is lower, the dividend yield can only be very good to achieve the expected internal rate of return.
It should be noted here that, according to Article 13 of the Actuarial Provisions on Participating Insurance, the insurance company shall set up one or more separate accounts for the participating insurance business, and the separate accounts shall be managed and accounted for separately, and all participating insurance business shall be independent of other businesses of the insurance company. The dividends of participating insurance are not the profits of the insurance companies, but the profits of the investment side of specific participating insurance products.
Judging from the historical data of past investments, although traditional products have been the mainstream products in the past 10 years, they have been 35% vs. 4025% products, but the overall investment return of insurance companies in the past 10 years is also very good, with an average investment return of 50% is slightly more, which is more than the best fixed rate products, because the rigid payment part of dividend insurance is relatively low, which means that the ability to bear risks is higher, and there is more willingness to do more equity assets to meet reasonable expectations of dividends.
In addition, the insurance company should set up one or more separate accounts for the participating insurance business, and the separate accounts should be managed and accounted for separately, so the different realization rates of different products of the same company may be placed in different accounts. The fulfillment ratio for our own products is determined on a separate account.
To sum up, whether it is due to consumers' pursuit of higher yields, or the prevention of interest rate losses by insurance companies, or changes in regulatory measures, dividend insurance is destined to be the protagonist of the drama of savings insurance in the era of low interest rates in the future.