In the past, as the C-position of the health insurance market, critical illness insurance held up a piece of the sky, and the scale of new single premiums once exceeded 100 billion.
However, with the shrinkage of the life insurance agent team in recent years, the impact of the epidemic, the demand for overdrafts during the switching period between the old and new definitions, and the lack of purchasing power of customers, critical illness insurance has bid farewell to the past highlights and has gradually been overtaken by medical insurance represented by Huimin Insurance and Million Medical.
From the perspective of the entire life insurance market, in the context of long-term downward interest rates, savings insurance products such as increased whole life have become the darling of the industry, while the presence of critical illness insurance is even bleaker, and new premiums have declined for five consecutive years.
When will the inflection point of critical illness insurance come? However, some interesting phenomena have emerged, that is, in the context of the regulator's efforts to promote the life insurance industry to prevent the risk of interest rate loss and guide the reduction of interest rates, critical illness insurance, a high-value product with strong protection attributes, has once again received the attention of many insurance companies.
In order to better promote the sales of critical illness insurance and enhance the attractiveness of the product, some insurance companies are actively trying to match the combination of "critical illness insurance + universal account". At the same time, some insurance companies also provide additional value-added services such as long-term care and critical illness rehabilitation, which reflects the gradual increase in the strategic importance of critical illness insurance by industry players. So, can critical illness insurance regain momentum, and what is the room for innovation?
Protect against the risk of interest rate loss
Assurance business back to strategic vision?
With the long-term decline in interest rates and the decline in investment income of insurance companies, preventing the risk of interest rate loss has become a high-frequency word in the insurance industry, and it is also the key regulatory direction in 2024.
For example, last year, the upper limit of the predetermined interest rate of ordinary life insurance products was lowered from 3.5% to 3%, the upper limit of the predetermined interest rate of participating insurance was reduced from 3% to 2.5%, and the upper limit of the minimum guaranteed interest rate of universal insurance was also reduced from 3% to 2%.
Heading into 2024, the tone of interest rate cuts continues. At the beginning of this year, the regulatory authorities gave window guidance to a number of life insurance companies, requiring that from January 2024, the settlement interest rate of universal insurance accounts shall not be higher than 4%, and after June, it will be further reduced to 3.8% and 3.5%, of which some large-scale and risk-disposing institutions need to be reduced to no more than 3.5%.
It is not difficult to see the determination of the regulator to prevent interest rate spread losses, which also forces insurance companies to pay more attention to asset and liability management, especially on the liability side, they can no longer "work hard" on savings insurance products, but further optimize the business structure and strengthen the innovation and supplement of protection products.
At the performance meeting held by listed insurance companies not long ago, the management of some insurance companies also released such signals. "In terms of changes in product structure, in the past few years, critical illness insurance has been the mainstay, and according to market demand, the proportion of whole life insurance has increased. In the future, we will increase the construction of diversified channels, further improve the scale and quality of marketing channels, including group channels, and further explore health insurance and pension insurance in terms of product structure, so as to balance the product structure and reduce the risk of market fluctuations. Gong Xingfeng, vice president of Xinhua Insurance, pointed out.
Zhang Yuanhan, head of finance and chief actuary of CPIC, also said at the performance briefing that in the new economic environment, the public's demand for protection, asset appreciation and asset inheritance is still huge. In this case, the company will reduce its sensitivity to interest rates by reducing the guaranteed interest rate of pricing, increasing the component of adjustable income in the product, increasing the proportion of guaranteed products, etc.
The marketing director of a large insurance company also bluntly said that there is still a strong demand for health protection products represented by million medical and critical illness insurance in the market, but many consumers have not yet fully realized the differences between million medical insurance and critical illness insurance in terms of product characteristics and meeting customer needs. If the follow-up industry can continue to improve its professional capabilities and better describe the functions and differences of different health insurance products, it is believed that they will maintain their due market position and product share.
"Critical Illness + Universal Account" is booming
Dealing with the pain point of lack of attractiveness?
Indeed, in the years when the scale of life insurance agents was rapidly expanding, critical illness insurance, as the "handle" of health protection products, once supported the value of new life insurance business.
Those who are familiar with the development of the industry know that the new business value ratio (new business value/new premium income) of critical illness insurance is as high as more than 80%, which is significantly higher than that of other types of products, and can drive the growth of new business value and embedded value of insurance companies. However, with the rise of cost-effective medical insurance such as Million Medical and Huimin Insurance in recent years, traditional critical illness insurance has suffered a great impact due to its low leverage, lack of attractiveness and rapid shrinkage of the agent team.
Relevant data shows that new critical illness insurance policies have declined for five consecutive years, and the volume of new critical illness insurance premiums in 2023 will be less than 20 billion yuan, which is far from the peak of new orders exceeding 100 billion yuan in 2018.
On the one hand, insurance companies have increased their demand for the development of long-term protection products under the prevention of interest rate spread losses, while on the other hand, critical illness insurance has not yet stepped out of the downward channel. In the next step, how to improve the attractiveness and purchasing power of critical illness insurance products has become a new market issue.
"A Smart Insurance" noticed that the current sales of critical illness insurance are quietly undergoing some changes, or in order to improve the product focus, many insurance companies have tried the combination of "critical illness insurance + universal account". For example, Taikang Life Insurance has recently launched Happy Health (Jiahui Adult/Jiahui Young) Critical Illness Insurance, which can be purchased to form an insurance product plan with Taikang Futai 2.0 Whole Life Insurance (Universal) (Futai 20,000 Universal Insurance Account), which can help customers lock in long-term benefits with a minimum guaranteed interest rate of 2%.
From the perspective of product liability, Taikang Life's Happy Health (Jiahui Edition) covers mild, moderate and severe diseases, which can be paid multiple times and has exemption from liability, which is similar to many lifelong critical illness insurance on the market, but its combination with the "universal account" undoubtedly gives the product an additional layer of "selling point". After all, in addition to the need for illness protection, wealth management is also a major necessity for many customers.
In fact, as early as 2020, Taikang Life Insurance was the first in the industry to launch the combination form of "health insurance + universal account". At that time, the relevant person in charge of the company said that in the past, the income dividend of the universal account could only be achieved by purchasing annuities and other products, but now health insurance can also be matched with the universal account, and the decline of the account threshold has opened the door to asset management for more Chinese people.
In March last year, Zhonghong Insurance also launched the "Zhonghong Health Hongxing All-round Insurance Product Plan", which adopts the combination form of "critical illness insurance + universal insurance", which combines the steady value-added characteristics of critical illness protection and universal insurance, which can not only provide health protection against critical illness risks, but also not affect the continuous and stable operation of wealth when risks come.
Also this year, Ping An Life launched an insurance product portfolio called "Ping An Ruyi Insurance Product Plan", which consists of fixed-term both-full + fixed-term critical illness + universal insurance.
On the whole, the combination of critical illness insurance main insurance + universal account takes into account the dual needs of public health protection and wealth management, and at the same time, it can also use the account function to offset premiums and pay for nursing services. For insurance companies, universal insurance is more of a means to stimulate the sales of critical illness insurance, tap into existing customers or monetize services.
After five consecutive years of declining new orders
Can critical illness insurance regain momentum?
From the perspective of the number of products, the form of "critical illness insurance + universal account" is currently only sporadic and has not yet formed the mainstream. So, will this combination be imitated by more insurance companies and recognized by more customer groups in the future?
In this regard, "A Smart Insurance" also consulted with senior insurance marketers and product experts around him, and the general view is that the form of "critical illness insurance + universal account" is still only a marketing selling point, and it is slightly difficult to form a growth point. Because the guaranteed interest rate and settlement interest rate of universal insurance are now going down, the uncertainty is greater, if the customer does have a wealth appreciation need, he may be more inclined to increase the amount of life or annuity insurance. In the future, insurance companies may need more changes if they want to make better use of the form of universal insurance, such as maturity conversion.
However, the above-mentioned professionals also pointed out that critical illness insurance may become the direction of insurance marketing in the future. It is observed that at present, the market channels have not yet been completely "integrated with newspapers and banks", such as economic agents, individual insurance channels, etc., and the products sold by insurance marketers are still relatively chaotic, but some people have turned their direction to critical illness insurance.
In particular, with the strengthening of the "surname insurance" and the use of the "stabilizer" and "shock absorber" functions of insurance, there may be fewer cases of large-scale sales of savings insurance as before. In addition, although the number of births is decreasing every year, the new generation of parents has not yet fully supplemented children's critical illness insurance, and they are also the main force of critical illness insurance in the future.
In the future, the functional positioning of critical illness insurance will gradually shift from medical expense compensation to income loss compensation, and the concept of regular critical illness will be strengthened. Because the fixed-term critical illness is lower, the protection leverage is higher, and it mainly covers the life stage with the strongest income capacity, it may be a more economical choice for the young and middle-aged insured group, and there are more and more fixed-term critical illness insurance products in the market, and the customer acceptance is also getting higher and higher.
It can be seen that the era of rapid development of critical illness insurance has passed, and it is difficult to reproduce and replicate, but this does not mean that the value of critical illness insurance is completely lost, how to strengthen the "economic compensation" positioning of critical illness insurance, and deepen the docking with wealth management and health services, while meeting the needs of customers for protection, how to improve the cost performance and flexibility of products, and how to wake up old customers to add insurance, covering non-standard people, etc., are the future innovation directions, waiting for market players to take the initiative to seek innovation, change, and embrace the new market environment.