China Insurance Association seeks feedback on model clauses for three participating insurance products, aiming to standardize key terms like dividends

By Wei Shuguang

In the first half of this year, premiums for participating insurance (分红险) in China's insurance industry directly exceeded one trillion yuan. Many consumers have been recommended such products by agents, who often emphasize that they "provide both protection and the potential to share in variable dividends." However, when it comes to actually purchasing a policy, many consumers find themselves confused: the wording of terms varies significantly across companies, key information is often unclear, and details on cash value and surrender rules are frequently buried in complex clauses. Moreover, what agents say during sales does not always align with the contract text.

Recently, the China Insurance行业协会 (Insurance Association of China) released for public comment three model clauses for participating insurance products, covering participating whole life insurance, endowment insurance, and annuity insurance. As an ordinary consumer who has long followed personal finance and has carefully studied insurance terms clause by clause, my first impression is that the long-standing problem of information asymmetry in participating insurance may finally be moving toward a clearer resolution.

Key Features of the Model Clauses

The most prominent characteristic of the three model clauses is their focus on "reducing the cost of consumer understanding and protecting the legitimate rights and interests of policyholders." The clauses aim to standardize wording across several areas that have long been pain points, making it easier for consumers to understand key rights such as policy dividends, cash value, and surrender terms. It should be noted, however, that the model clauses are still in the public comment phase and are positioned as industry-standard texts. The final terms and scope of application will be subject to the officially released version.

Standardization of Basic Rules

For ordinary policyholders, the most notable aspect is the convergence of basic rules. Under the proposed model clauses, the core rights of participating whole life insurance, endowment insurance, and annuity insurance will adopt unified wording as much as possible. Taking "policy dividends" as an example, the clauses aim to clarify the principles of dividend business accounting and distribution, reducing the room for different companies to interpret the scope of dividends in varying ways. This will help address the issue of the same concept being expressed differently across products. However, it is important to note that standardizing wording does not mean dividend levels will be consistent, nor does it imply that dividends can be predetermined.

Key Information Brought Forward

Another important change is the requirement to place key information—previously difficult to locate—at the forefront. The model clauses propose that contracts include a table of the calculation basis for the cumulative dividend cash value at the end of each policy year. After receiving the contract, consumers can directly view the basic information for the corresponding year, reducing the need for repeated inquiries and cross-checking. However, this table provides only the calculation basis and does not represent the actual dividend amount for any future year. The dividends that can actually be received will still depend on the insurer's actual operating performance and distribution plan.

Enhanced Consumer Rights During the Cooling-Off Period

The model clauses also address consumer rights during the cooling-off period. They propose removing the provision that allows insurers to charge administrative fees for policy cancellations during this period. Additionally, clauses that exempt the insurer from liability will be required to be highlighted in a more conspicuous manner, reducing the likelihood that important information is buried in fine print. Such adjustments will help consumers fully understand the scope of coverage and the boundaries of liability before purchasing a policy.

A Broader Regulatory Context

From a longer-term regulatory perspective, these model clauses represent a further extension of the governance of participating insurance products. In recent years, regulators have already taken steps to compress the space for misleading sales by constraining dividend demonstration levels, lowering the assumed dividend rates used in illustrations, and requiring disclosure of dividend realization rates. Now, standardization is extending from sales practices to the product terms themselves, helping to establish a more unified and understandable expression system at the contract level and reducing information asymmetry created by differences in wording.

Looking Ahead

The model clauses are expected to help shift the focus of participating insurance from "relying on illustrations and sales pitches" to "reading the contract, comparing services, and emphasizing long-term value." Product design and sales are only the starting point. Whether long-term operating results can be delivered is the true test of an insurer's comprehensive capabilities. The investment returns of participating accounts will be influenced by bonds, equity assets, and market conditions. Divergence among insurers may increase, and the importance of asset allocation, risk management, and asset-liability matching capabilities will rise accordingly.

This column represents the personal views of the author.