Dividend insurance guaranteed interest rate "breaks the ice" to 1.25% Life insurance industry accelerates switching to the new track of "low guarantee + high floating"

Source: Economic Information Daily Author: Xiang Jiaying

The guaranteed interest rate for personal insurance products has once again experienced a shift. Recently, joint venture insurer China-UK Life launched the “Fumanjia C (Enjoyment Version) Whole Life Insurance (Dividend Type),” setting the guaranteed interest rate cap at 1.25%, a 50 basis point decrease from the industry-standard 1.75%. Meanwhile, the product demonstration rate has also been adjusted from 4.25% to 3.9%.

In the context where regulatory authorities have not yet mandated a reduction in the guaranteed interest rate cap, this proactive move has quickly attracted market attention. This not only signifies that the guaranteed returns for dividend insurance are entering the “1% era,” but also signals a clear industry shift towards a deeper restructuring of the yield model: the long-standing “high guarantee, low fluctuation” approach is accelerating towards “low guarantee, high fluctuation.” An industry transformation driven by liabilities and asset-side adjustments has begun.

Joint Venture Insurers “Break Through”: Proactively Positioning in a Low-Interest Environment

The core change in China-UK Life’s new product is a significant tilt in the profit balance. The guaranteed return of 1.25% accounts for only 32% of the total demonstration rate (3.9%), meaning that over two-thirds of future customer returns will depend on the insurer’s actual investment performance. In contrast, the mainstream products with a guaranteed return of 1.75% still have a guarantee portion close to 45%.

Why proactively lower yields during the sales window? Wang Xiao, Assistant General Manager and Chief Marketing Officer of China-UK Life, explained that this is an exploration of a “growth-oriented” dividend strategy. “In mature insurance markets, dividend insurance typically accounts for over 50%, with the core logic of ceding part of the product benefits in exchange for long-term value growth.” He revealed that the company is building a multi-layered dividend system covering different risk preferences, using gradient guaranteed interest rates to precisely match customers’ needs for guaranteed protection, moderate appreciation, or high growth potential.

It is noteworthy that this is not the first attempt by joint venture insurers. Previously, companies like Tongfang Global Life and Sino-Italian Life launched dividend insurance products with a guaranteed interest rate of 1.5%. Industry insiders believe that the reason these joint ventures dare to be “pioneers” is that their foreign shareholders have experienced multiple complete interest rate cycles and are more sensitive to spread risk. “They prefer to reduce guaranteed returns to ease the pressure of rigid payouts, sharing risks with customers, which aligns with the long-term logic of ‘profit sharing’ in mature markets.”

From a policy perspective, this rate reduction is purely an independent decision by insurers. According to the dynamic adjustment mechanism for guaranteed interest rates established by the China Banking and Insurance Regulatory Commission, the current maximum guaranteed rate for ordinary products (2.0%) is only 11 basis points above the research value released in January 2026 (1.89%), and has not triggered a mandatory adjustment threshold. This “non-triggered” window has become a strategic opportunity for some insurers to proactively position and plan for the future.

Autonomous Rate Reductions Become the Trend: From “Price Wars” to “Capability Battles”

China-UK Life’s “breakthrough” is not an isolated case. Industry insiders reveal that among leading personal insurers, four have already completed the filing and reserve of dividend products with a guaranteed rate of 1.25%. Although these products have not yet been launched due to market acceptance and timing considerations, the layout is complete. Meanwhile, several medium-sized insurers with a proactive attitude plan to launch similar products by 2026 to complete a gradient product matrix.

Looking back, this kind of self-initiated “interest rate reduction” has precedents. In June 2024, when the industry generally adopted a 2.5% guaranteed rate, Fosun Prudential Life was the first to file a 1.75% dividend insurance product, after which the industry entered a downward adjustment cycle. It seems history is repeating itself, but the background of this round of adjustments is more complex—long-term interest rates continue to decline, with the 10-year government bond yield remaining around 1.8%, putting significant pressure on insurance funds’ investment side.

“If the guaranteed rate remains at 1.75%, the spread risk exposure will continue to grow,” said Zhang Siyuan, a researcher at Shanghai Commercial Bank. Lowering the guaranteed rate can directly reduce the rigid liability expenses, which is a rational choice for insurers in a low-interest-rate environment. Huachuang Securities also believes that the likelihood of triggering a sector-wide guaranteed rate cut in 2026 is small; this year’s adjustments are more about insurers proactively adjusting based on their own strategies, with leading companies expected to follow suit at appropriate times.

For consumers, does the reduction in guaranteed interest rates mean lower returns? A senior insurance broker said that although the guaranteed returns are lowered, the overall expected returns are not significantly different from products currently on sale. “In the past, dividend insurance was more like a ‘fixed income substitute,’ with customers accustomed to rigid payout expectations. Now, the guaranteed portion is reduced, but the floating space is opened up, so long-term total returns may not necessarily decrease.”

Deeper industry changes involve a reshaping of competitive logic. Industry experts believe that insurers’ proactive rate reductions send a clear signal: future product returns will increasingly depend on dividend realization rates, with floating returns becoming a core component. This means insurers will shift from simply competing on “rigid guarantees” to competing on long-term investment and operational capabilities, with dividend realization rates likely becoming a key indicator of product competitiveness.

The investment logic is also clear. “Lower guaranteed rates mean more room for equity holdings,” said Xu Yishan’s team at Founder Securities. When guaranteed returns are lower, insurers can cover the guaranteed portion with fixed-income assets and moderately increase long-term assets like stocks and equities. When the investment environment is favorable, they can share excess returns; under pressure, they can buffer by lowering dividend rates.