Insurers to be allowed to set rates on life products
Print Edition
China is to let insurers set interest rates on life insurance products for the first time in more than a decade, the country’s top insurance regulator said yesterday.
A 2.5 percent upper limit on pre-determined rates for life insurance products will be scrapped from Monday after being in place for 14 years, the China Insurance Regulatory Commission said at a briefing in Beijing.
The move will allow insurers to issue more attractive products as the previous rate is lower than the current one-year deposit rate.
But the regulator sets a 3.5 percent ceiling interest rate for the reserve cash insurers put aside from sales of the products, aiming to control risks. Pension products are set a 4 percent interest rate for reserve cash so insurers could offer higher returns for older people.
Insurers that set their rates higher than 3.5 percent need to register their products at the regulator.
The change will only affect assurance and saving products, leaving regulations on investment-related products unchanged.
“The interest rate reform may impact about 5 percent of new policies of insurance companies,” GF Securities wrote in a note. “Life insurance products could be more competitive comparing with wealth management products and deposits, but insurers are not likely to lift their rate much under solvency pressure.”
The regulator said the deregulation is the first step toward complete opening of pricing life insurance products.
Trials including tax-deferred pension products will be carried out before pricing control is ultimately lifted, according to the commission.
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