China's insurance industry unveils first-ever standardized clauses for participating life insurance

For the first time, participating insurance (分红险) products are receiving industry-wide standardized model clauses.

The China Insurance行业协会 (China Insurance Association, IAC) recently released three draft model clauses for public comment:

• Model Clause for Participating Whole Life Insurance (终身寿险(分红型)示范条款)
• Model Clause for Participating Endowment Insurance (两全保险(分红型)示范条款)
• Model Clause for Participating Annuity Insurance (年金保险(分红型)示范条款)

The public comment period ends on September 30, 2026.

Background and Purpose

In recent years, with economic and social development, growing demand for wealth management among residents, and the continuous enrichment of life insurance product structures, participating insurance has played an increasingly important role in meeting both risk protection and long-term stable wealth management needs.

The release of these three model clauses aims to:

• Establish standardized industry wording for floating-benefit insurance product clauses
• Standardize common expressions used in participating insurance
• Guide sales and information disclosure practices
• Improve the accessibility, fairness, and consumer-friendliness of insurance services
• Better protect the legitimate rights and interests of consumers

Making the Dividend Logic Clearer

Model clauses serve as industry-standard reference texts for standardizing insurance contract content. Previously, the IAC had already issued model clauses for term life insurance, whole life insurance, and other ordinary-type insurance products. These new participating insurance model clauses represent an extension and complement to that standardization system.

Key Features of the Draft Clauses

Each of the three draft model clauses contains 32 articles. Key improvements include:

Standardized Key Terms:

• Unified expressions for terms such as "sum insured," "policy dividend," "cash value," "suspension and reinstatement of coverage," and "outstanding amounts"
• Embedded dividend explanations for each relevant item

Examples of Standardization:

• The "sum insured" article clarifies the impact of:
• Paid-up additions under cash dividends (where policyholders convert dividends into additional coverage via a single premium)
• Reversionary bonuses (where insurers distribute surplus by increasing the sum insured)
• The "policy dividend" article specifies: dividend sources, distribution methods, accumulated interest, premium offset, paid-up additions, annual dividends, and terminal dividends

Enhanced Dividend Information Disclosure:

• For cash dividend paid-up additions and reversionary bonus products, the clauses require that "the calculation basis table for the cash value corresponding to dividends at the end of the policy year be stated in the contract"
• This improves consumers' right to know when purchasing insurance

Flexibility for Insurers:

• Items such as "paid-up additional insurance participating in dividend distribution" and "clients' right to accumulated dividend interest during the policy suspension period" are included as optional content
• This provides industry-standard wording while retaining operational flexibility for insurers

Protecting Consumer Choice:

• The three model clauses cover the main categories of participating insurance products on the market
• A unified clause framework facilitates horizontal comparison across different product types
• Standardized expressions for "insurance liability," "annuity payment method, frequency, and start date" protect consumers' right to know and fair dealing

Improved Readability:

• Common clause expressions such as "contract composition," "coverage scope," "cooling-off period," "exclusions," "other exclusions," and "definitions" are aligned with existing model clauses for ordinary term life and whole life insurance
• This standardization of basic rights and obligations enhances reading consistency across multiple types of insurance policies

Rapid Premium Growth Demands Standardized Development

The release of these model clauses for public comment comes amid a surge in participating insurance premium volumes.

According to IAC inter-industry exchange data:

| Metric | H1 2026 | YoY Change | |--------|---------|------------| | Participating insurance original premium income | RMB 1,012.6 billion | +94.4% | | Life insurance companies' total original premium income | RMB 2.87 trillion | +3.6% |

"Participating insurance has developed rapidly in recent years and has become an important direction for life insurance companies' product transformation," said Yang Fan, General Manager of Beijing Paipai Insurance Agency Co., Ltd., in an interview with International Financial News. "However, as the market expands, product clauses and sales services also need further standardization."

According to Yang's analysis:

• Participating insurance products offer both guaranteed benefits as stipulated in the contract and uncertain dividend distributions
• Products from different companies vary in dividend payment methods, cash values, and surrender rules, making it difficult for consumers to understand and compare
• Sales processes require special attention to distinguishing guaranteed from non-guaranteed benefits, to avoid consumers mistaking illustrated returns or historical dividend realization rates as guaranteed future returns

Yang believes that the development of these model clauses will help:

• Unify the wording and structure of basic clauses
• Make coverage responsibilities, dividend distribution, and contractual rights and obligations clearer
• Provide a reference for insurers to standardize product development and sales explanations

Long Ge, Deputy Director of the Innovation and Risk Management Research Center at the University of International Business and Economics, noted to reporters that current participating insurance products have inconsistent clause wording. "There are market phenomena where 'non-guaranteed dividends' are marketed as 'quasi-fixed income,' and terminal dividends or paid-up additions are described as 'guaranteed returns,' leading to a surge in complaints and disputes over participating insurance returns."

"The model clauses fill the gap in standard texts for participating insurance. Together with the 2026 version of the life insurance 'negative list' and the cap on illustrated interest rates being lowered to 3.5%, this regulatory package reduces pre-sale misleading and post-sale disputes at the source," Long said.

Impact on Insurers and Consumers

For Insurers: Yang Fan pointed out that the model clauses help:

• Reduce differences in basic contract wording
• Improve standardization in product development, compliance review, and sales training
• As the share of participating insurance sales increases, insurers must not only design clear product clauses but also maintain consistency in benefit illustrations, dividend information disclosure, and long-term customer service—not just emphasize potential returns during sales

For Consumers:

• More unified and clearer basic clauses help consumers understand the difference between guaranteed and non-guaranteed benefits
• Easier comparison across different products
• Important caveat: Model clauses do not mean that participating insurance returns from different companies will converge, nor do they guarantee dividends
• When selecting products, consumers should still consider:
• Their own fund usage timeline and protection needs
• Contractually guaranteed benefits
• Surrender losses
• Dividend distribution rules
• The insurer's long-term operational capability

Long Ge added that, in the long term, insurers' competitive focus will shift from sales pitches and illustrated rates to dividend account management and long-term investment capabilities. Consumers should note that model clauses are industry self-regulatory texts and do not affect existing policies. For new policies, the final policy terms and dividend realization rates remain the binding reference.