Insurance 315 | Dividend Insurance on the Rise! Three Major Consumer Misconceptions Hidden Beneath the Prosperity

[Global Network Finance Report by Feng Chaonan] In today’s environment of normalized low interest rates, dividend insurance products, represented by variable return insurance, are gradually replacing traditional savings insurance and firmly occupying the mainstream market position.

(图/东方IC)

For insurance companies, the “guaranteed return + floating dividend” structure of dividend insurance essentially transforms the single “interest spread loss” risk into a “non-guaranteed” risk shared with customers. This transformation not only provides insurers with greater investment flexibility and tolerance for errors but also offers customers the opportunity to share potential excess returns.

From the consumer’s perspective, this return structure balances the dual needs of “safety and growth.” However, faced with a wide array of dividend insurance products on the market, how to rationally select and avoid pitfalls has become a practical issue for consumers.

01 From interest spread dilemma to steady growth: How can dividend insurance solve industry challenges?

With market interest rates continuously declining and the profitability of equity markets facing significant risks, traditional fixed-income savings insurance products put insurers in a dilemma: high interest rates lead to interest spread risks that threaten solvency and survival; low yields lack competitiveness and make it difficult to attract customers, resulting in slow business growth.

In contrast, dividend savings insurance, with its “minimum guarantee + floating” return structure, combined with features such as insurance protection, asset inheritance, and retirement planning, meets consumers’ needs for both protection and returns. It also alleviates operational risks for insurance companies.

“Thanks to the relatively low guaranteed return set, insurers can strengthen their fixed-income asset allocation while increasing investments in stocks, equities, real estate, and infrastructure—long-term high-yield non-standard assets,” said Yang Zeyun, a professor at the Business School of Beijing Union University. When investment environments are favorable, insurers share excess returns with customers; when conditions are poor, they reduce dividend rates to ease their own pressure. This mechanism gives insurers resilience through economic cycles and is their ‘moat’ for survival in a low-interest-rate era.

Additionally, a representative from Huatai Life told Global Network that the development of dividend insurance aligns with regulatory guidance for healthy, high-quality industry growth and meets consumers’ long-term wealth management needs for “fund safety, transparent returns, and long-term accumulation.”

Notably, recently, some non-listed insurers have launched dividend insurance products with a preset interest rate of 1.25%, breaking the industry standard of 1.75%.

Regarding this new industry trend, Yang Zeyun believes it signals three key points: first, the long-term interest rate expectations are declining; second, insurers are proactively loosening investment restrictions. The lower the guaranteed interest rate of dividend insurance, the greater the room for insurers to tolerate investment errors, increasing the likelihood of investing in high-yield long-term assets; third, it promotes a shift from “rigid guaranteed returns” to “non-guaranteed floating returns.”

02 Rational reflection amid the boom: consumers are prone to three major misconceptions

As major insurers actively develop dividend insurance products, the key question for consumers is how to choose.

Furthermore, compared to traditional insurance products, dividend insurance has more complex product designs, making it harder for consumers to understand and posing greater challenges for sales. Long-term fixed-income preferences formed by traditional insurance customers also mean they need a gradual process to accept floating return products. More concerning is that consumers are prone to three misconceptions when allocating dividend insurance: mistaking “demonstration interest rate” for actual future yields; misunderstanding the “dividend realization rate”; and treating dividend savings insurance as bank deposits.

Specifically, the demonstration chart of dividend insurance benefits divides into guaranteed benefits and dividend benefits. The guaranteed benefits are the returns customers are assured to receive, while dividend benefits are non-guaranteed and depend on the insurer’s investment performance. This visual presentation often leads consumers to mistakenly believe that the projected dividends are guaranteed, overlooking their variability and uncertainty.

Moreover, many consumers regard the dividend realization rate as an important reference indicator. The so-called dividend realization rate is the ratio of actual non-guaranteed dividends paid out by the insurer in a year to the projected non-guaranteed dividends shown in the plan.

Behind this lies a key logical relationship: the higher the demonstration interest rate set, the lower the dividend realization rate at the same actual dividend level. Insurers often set relatively high demonstration interest rates to attract customers, but this makes achieving the projected dividends more difficult. Therefore, using the dividend realization rate alone as a product selection criterion is not accurate.

“Many consumers compare the yield of dividend insurance with bank deposit returns when purchasing, and since bank-distributed dividend insurance is sold within bank branches, many mistakenly think dividend insurance is as liquid as a bank deposit, with easy access. In reality, current dividend savings insurance typically requires 5 to 10 years to withdraw without loss of principal, and achieving the advertised higher yields often requires 20 or even 30 years,” said Yang Zeyun.

Faced with complex market conditions and misconceptions, a representative from Huatai Life believes that over the past decade, the market has shifted from high to low interest rates and from pursuing yields to emphasizing stability. Whether a dividend insurance product can succeed long-term depends on whether the company’s management philosophy truly centers on “long-termism.” For consumers, choosing dividend insurance is also a “long-distance marathon.” It is recommended to consider three aspects: first, the company’s stable operation and shareholder strength, which are the foundation for long-term product fulfillment; second, the company’s historical dividend performance, to see if it consistently exceeds market averages; third, matching the product to personal family needs, considering risk tolerance and investment horizon.