" Life insurance is an important part of personal insurance and a top priority in building our life defense system. Its unique protection + savings function helps us to do a good job in family financial planning and helps us obtain cash flow of life. "
First, let's look at a set of industry data: As an important part of personal insurance, life insurance accounts for more than 70% of the total personal insurance premium scale; including property insurance, the entire industry accounts for more than 50%. Well, that's the point we need to pay attention to.
What is life insurance?
Life insurance is a personal insurance business that uses 's lifespan of the insured as the insurance subject , and uses 's survival or 's death as the insurance accident (conditions for paying insurance premiums).
We already know that critical illness insurance pays insurance when an agreed major disease occurs, while accident insurance pays insurance when an agreed accident occurs. Life insurance is when the insured dies during the insurance period and survives until the expiration of the insurance contract or the agreed age, the insurer pays the death insurance or survival insurance according to the contract.
Why can insurance companies use human life and death as the subject of underwriting?
Why can insurance companies use human life and death as the subject of underwriting? Here we mainly talk about the principles behind life insurance.
Objectivity and insuranceability of life insurance . Life risks are predictable, we have life table (mortality rate for people of different ages and genders) for pricing.
inserts an interesting knowledge. In 1693, British astronomer and mathematician Edmund ·Harley compiled the first life table in human history. Although the generally objective risk of death is uncertain for an individual, the risk of death is predictable for a certain area or a specific population. my country's insurance industry has released three life charts so far.
losses are evenly aligned and balanced premium . Each of us pays premiums to protect ourselves. The insurance company distributes the losses to everyone. The premiums we pay cover the risks of a certain person. The so-called equilibrium means that after calculates the premiums we need to pay in our lifetime, takes an average level, and the premiums we pay every year are the same, rather than paying different premiums according to the mortality rate at each stage (this is a natural premium).
risk homogeneity . Risk homogeneity means that each risk unit has the same chance of loss, the time may occur, or the magnitude of loss is not certain, but the chance of loss is equal. For example, factors that affect homogeneity risks include age, gender, occupation, health status, living environment or family medical history, living habits, past medical history, personal hobbies, etc.
Common types of life insurance
We expand the classification according to the perspectives of ordinary life insurance and new life insurance. First of all, traditional general life insurance can generally be divided into term life insurance , lifetime life insurance, whole life insurance , annuity insurance , etc.
Term life insurance is based on the payment condition of death within a fixed period. Why is there a term life insurance product? Term life insurance has much higher cost performance (the risk exposure time is short, compared to life), and is more suitable for situations with a small temporary budget. You can configure term life insurance to make a transition. This way, you can get high coverage with very low premiums.
lifetime life insurance , also known as high-leverage lifetime insurance, the insured has a young age, low premium, but the coverage amount is fixed, and it plays a higher leverage role. In addition, after the insured dies, the amount paid will be given to the designated beneficiary, which will serve as a heritage, so life insurance is allocated to the beneficiary.
Increased lifetime life insurance is a celebrity product on the market since the end of last year and now. Various "big orders" are common in Mingya . The advantage of increasing the lifetime life is reflected in the "increase". is a life insurance that can grow for life and cash value. It has the basic protection function of life insurance. The insurance amount is paid when death. Due to the continuous growth of the insurance amount and cash value for life, it also has certain savings functions. During the coverage period, the insured person can withdraw cash through "reduced insurance" (reduced insurance means applying for withdrawal of part of the cash value. There is no limit on the amount, number and time of the insurance reduction, and it is more flexible.) To a certain extent, it can also be said that the increase in lifetime life insurance is allocated to the insured.
Annual insurance is also a hot topic that has been continuously attracted by the market in recent years. It is also very simple to understand. We put some money in the insurance company. In a certain period of time in the future, the insurance company will regularly pay us according to the contract agreement, which can be monthly, quarterly, six months or annual frequency. In terms of method of collection, annuity insurance continues to receive money at a certain time point, like paying wages, such as pension annuity. Starting from the agreed time of collection, how long you live, and how long you will receive it until you die, you can obtain cash flow of the same length as your life.
New life insurance is mainly divided into dividend insurance, investment connection insurance and universal insurance. These insurances are essentially annuity insurance, but they only make certain changes to their income methods based on annuity insurance. The common features are forced savings and locking in long-term returns (usually 10 years, 20 years, or even lifelong). The above chart provides a brief introduction to these three insurances, and further explored below.
Fixed income insurance and "pre-order interest rate"
Understand the difference between savings insurance, and can be expanded from different income methods. First of all, fixed income means that the insurance company gives us a promised fixed income (the industry uses "pre-order interest rates"). Please pay attention to the following explanation of the predetermined interest rate:
The so-called predetermined interest rate can be understood in this way. The premium paid by us purchases such as lifetime life insurance and annuity. It is the "liability" of the insurance company, which is equivalent to the insurance company borrowing a sum of money from us and returning the money to us according to the agreed time of the contract and the amount. Without considering other factors and details, the price calculated by simply passing through the agreed amount and years is the premium, and the reimbursed interest rate is the pre-determined interest rate.
For example, consider the simplest case, if a product is priced at a pre-order interest rate of 3.5%, and it is agreed to return 10,000 yuan to us in 10 years, then today, the insurance company's premium pricing for the product is: 10,000 ÷ (1 + 3.5 %) ^ 10= 7,089 yuan. shows that the higher the pre-order interest rate, the less premium we insured will have to pay for the same amount. Of course, this is just a theoretical situation, but the actual situation is that the premium is higher than this theoretical value. The reason is that the cost of expenses is added, such as sales costs, management costs, risk costs, etc.
Here we can highlight the characteristics of the so-called "guaranteed" of savings insurance. Because the predetermined interest rate of each product of savings insurance is determined by , and needs to be written into the contract . The predetermined interest rate will not change during the validity period of the insurance contract, which is beneficial to our insured, the insured and the beneficiary. What does that mean for insurance companies? If the insurance company's actual investment return does not reach the predetermined interest rate in the future, a repayment risk will arise.(Regulatory companies are subject to regular review)
When we purchase such insurance products, we will return funds to us at the agreed rate of return after the contract expires. The fixed rate of return of different products is different, some are 2.5%, some are 3.5%, and some are 4.025%. Here we need to mention the regulatory background of the birth and exit of the once popular 4.025% predetermined interest rate products:
This involves the first more important regulatory document "Notice of the China Insurance Regulatory Commission on Matters Related to the Reform of the General Personal Insurance Premium Rate Policy | The insurance company mentioned in the document "2013] No. 62"
that the pre-order interest rate for ordinary life insurance shall be decided by the insurance company in accordance with the principle of prudence. It is also mentioned that the statutory appraisal interest rate for ordinary life insurance policies issued after August 5, 2013 is 3.5%, and in order to support insurance companies to participate in the construction of a multi-level pension security system, differentiated reserve appraisal interest rate for pension insurance businesses encouraged by national policies. For ordinary pension annuity or other ordinary pension insurance policies issued on August 5, 2013 and after, the statutory liability reserve appraisal interest rate adopted by the insurance company can be appropriately increased, with the upper limit being 1.15 times the statutory appraisal rate of and the smaller of the pre-determined interest rate.
This means that the maximum predetermined interest rate for annuity policy with an insurance term of 10 years or more can be 3.5%*1.15=4.025%.
As the market environment changes, the regulatory environment also changes. In order to further strengthen actuarial supervision of personal insurance, better protect the legitimate rights and interests of insurance consumers, and promote the high-quality development of the personal insurance market, here is the second more important regulatory document: On August 30, 2019, the China Banking and Insurance Regulatory Commission issued the "Notice on Improving the formation mechanism for the assessment of the liability reserves in the personal insurance industry and adjusting the assessment of the interest rate of the liability reserves in the life insurance industry. Banking and Insurance Regulatory Commission [2019] No. 182".
mentioned improving the formation mechanism of the personal insurance industry's liability reserve assessment interest rate , and decided to adjust the personal insurance industry's valuation interest rate.
When I came to this, I must say what is the interest rate of the liability reserve assessment? During the operation process, insurance companies need to withdraw " insurance liability reserve " in accordance with regulatory requirements (is a bit similar to the bank's deposit reserve?) to deal with future operating risks and ensure the fulfillment of the repayment liability for the insurance contract. When calculating this insurance liability reserve, a very important factor is to stand at the current point in time and predict the investment return rate of insurance funds in the future. The higher the assessed interest rate, the more confident you are in future investment returns, the fewer liability reserves that need to be withdrawn, and on the contrary, more liability reserves must be provided. Insurance companies need to implement the regulatory provisions on the statutory liability reserve assessment interest rate, which is the assessment upper limit.
Regulatory agencies will evaluate and predict the investment return rate of future insurance funds based on the latest macro and market economy situation, and adjust the statutory liability reserve assessment interest rate. Then this adjustment action will have a certain impact on the current and future insurance products of insurance companies. Because the adjustment of this liability reserve directly affects the insurance company's profits. If the liability reserve is high, the profits will be low, otherwise it will be high. (Of course there are many factors that affect profits)
The adjustment of the liability reserve appraisal interest rate is reflected in:
So what impact does the China Banking and Insurance Regulatory Commission have on the reduction of the liability reserve appraisal interest rate in 2019 at the specific insurance product level?
(1) All insurance policies insured after August 2013 must be subject to 3.5%. It means that all insurance policies that have been insured with a pre-determined interest rate above 3.5% need to withdraw more liability reserves than before. From a regulatory perspective, this strengthens the control of performance risks, and from the perspective of insurance companies, this will affect profits to a certain extent. Therefore, we have seen some insurance products with high pre-order interest rates (more than 3.5%) that already exist, and are discontinued.
(2) The insurance company's new insurance product, the critical point for determining the predetermined interest rate is 3.5%. The predetermined interest rate of the new product developed in the future will not be higher than this upper limit, so it is enough to register. If it wants to exceed this upper limit, it needs to go through the approval process (there is a high probability that it will not pass).
In short, the popular phenomenon of "reducing the predetermined interest rate from 4.025% to 3.5%" in the market is behind the essence of supervision in order to strengthen the supervision of statutory responsibility reserves, the appraised interest rate level of the liability reserves of ordinary long-term annuities is lowered from 4.025% to 3.5%".
is equipped with a long picture below, which sorts out the difference between these two "rates".
below, sorting out the difference between these two "rates". ml0dividend insurance
dividend insurance will also promise a fixed income, which can also be "guaranteed". In addition, insurance companies will also pay dividends.
How to pay dividends in detail? Insurance companies concentrate all policyholders' premiums to invest. According to the allocable surplus, insurance companies and policyholders will pay dividends together. According to the latest regulatory regulations (February 2020 The China Banking and Insurance Regulatory Commission issued the "Notice on Strengthening Actuary Supervision of Personal Insurance" ), which clarified the upper limit of dividend insurance dividend distribution demonstration interest rate , and set the dividend distribution ratio to 70% (70% to the policyholder, 30% to the insurance company). This policy is conducive to preventing the risk of interest rate spread loss in the industry and preventing insurance companies from vicious competition through dividend demonstration.
Specifically, we must know that not every The dividend amount of each insured is the same, but it must be determined based on our premium contribution. If the premium investment is high, the dividend will also be high. When choosing a dividend insurance, you must examine the profitability of the insurance company. Generally, there will be a three-level high, medium and low income demonstration in the product plan. We can go to the insurance company's official website to check the income situation in the past few years for reference.
universal insurance
universal insurance, like fixed income and dividend insurance, will also promise guaranteed principal income. However, the method is relatively flexible. You can adjust the insurance amount, premium, and payment period based on your actual situation. The difference between universal insurance and dividend insurance is that you have a separate " investment account ". After deducting the premium of the policyholder's insurance premium and risk premium, the remaining part will enter the investment account; the insurance company conducts investment operations, and the fees and returns will be announced to the policyholder, which is more transparent.
Choose universal insurance, the first thing you need to pay attention to is the initial fee of . Using , the initial fee is the fee that must be deducted before the premium enters the universal account. If this fee is too high, it will affect the principal in our investment account. Secondly, what you need to pay attention to is the "redemption cycle", and "redemption" is also the refund of insurance . If you cancel the insurance shortly after buying it, you will pay a certain handling fee. (Similar to the situation when we buy funds?)
In addition to the above fixed income type, dividend type, and universal type insurance, there is also an investment-connected insurance, which is a product that is not guaranteed. The insurance public The company only charges investment management fees from premiums, and the policyholder enjoys investment returns and bears the risks at his own risk. Therefore, if it is to allocate insurance, this type is unnecessary. If you want to invest and manage financially, don’t you choose more?
Important tips
0 has been shared above. Several traditional and new types of life insurance have been found. It can be seen that life insurance has both the underlying risk protection function, we can obtain death insurance, and it also plays a role in inheritance; it also has the savings function to deal with large future expenditures, and annuity insurance helps us in the established period or the end If you get the cash you need at that time, the returns of dividend insurance and universal insurance are slightly higher and the flexibility is slightly higher; overall, different types of insurance will also have combinations to meet our diverse needs. Finally, there are two more important tips.
First of all, let’s review the purpose of our insurance allocation to deal with different stages and types of risks in life. Savings insurance is not investment, but forced savings, and is to allocate resources across time. The returns are unlikely to be very high. We pursue the certainty of returns, so that we can manage expectations well.
Secondly, look at the end of the period, and also the return at the time of redemption. What does it mean? Insurance products will make end-of-term returns for profit demonstrations in different years, because of the existence of compound interest, the returns will be very high when we are in our seventies or eighties, or even a hundred years old. But if we allocate education funds, it depends on the child’s income in the years of college, because it will be withdrawn at that time, and it will be useless to look at the income in decades. If it is a pension, it depends on the level of income we earn when we retire.
Finally, configure the funding budget for financial insurance, which may vary from person to person. It is generally recommended not to exceed 25%-40% of the investmentable surplus; what is an investmentable surplus? It can be simply defined as annual income - the necessary annual expenditure.
To summarize, today we introduced the concept, principles and classification of life insurance, and gave a certain in-depth introduction to the pre-order interest rates and regulatory changes of current hot saving insurance. Overall, we continue our original intention of configuring insurance. When we build a risk defense system in life, after setting up basic risk protection, can be configured with long-term assets , which has both offense and defense, such as the above-mentioned savings insurance. Savings insurance is essentially annuity insurance, but it is divided into many types according to the different income methods, payment methods, and term periods. Just choose based on our own goals.
