From "Selling Policies" to "Managing Risk," the Life Insurance Industry Reaches a Crossroads

(Author Yang Jun, Senior Financial Expert)

The State Administration of Financial Supervision and Administration’s release of “Insurance Industry Operations in 2025” shows that in 2025, China’s life insurance gross premium income will reach 4.36 trillion yuan, an 8.9% increase year-over-year. However, behind this seemingly impressive performance, there are uneven gains and mixed feelings. On one side are new trends like moving deposits, cost optimization, and high-value customer dividends; on the other are old challenges such as agent attrition, interest margin loss risks, and investment pressures. This is not just cyclical fluctuation but a sign that the industry, after thirty years of rapid growth, is at a crossroads of “old leaving, new arriving.”

1. Observing the Surface: Four Major Changes

The life insurance industry is currently experiencing four major shifts.

Change One: Agent “Reduced Quantity, Improved Quality”

The previous “mass recruitment” strategy that sustained the industry is gradually losing effectiveness. From 2019 to 2024, the number of agents plummeted from 9.12 million to 2.64 million. Meanwhile, leading insurers are actively recruiting top talent from investment banks, law firms, and other sectors with high salaries. Coupled with AI technology, individual agent productivity has significantly increased.

Change Two: Product Homogenization to Differentiated Segmentation

A look at product catalogs shows critical illness and medical insurance remain highly similar, with price wars squeezing profits thin. Meanwhile, the low-interest-rate environment is driving a “deposit relocation” trend. Insurance products, with their long-term stable returns, are becoming key options for residents’ prudent financial management, leading to a surge in savings-type insurance demand. Deepening healthcare reforms also open new spaces for health insurance, with innovative products like insurance for pre-existing conditions and long-term care insurance accelerating. The product structure is shifting toward a “savings + protection” dual-driven model.

Change Three: Rigid Debt Costs Decline, Gradual Resolution of Interest Margin Risks

By 2025, China’s population over 60 exceeds 323 million, with increased life expectancy and aging. The cost pressures from older policies are significant, but new business liabilities are effectively controlled. Under policies like “integrated reporting and operation” and “life insurance reserve rate reforms,” industry cost competition has become more rational, and liability funding costs have significantly decreased. Additionally, by increasing the proportion of participating, health, and other insurance products, insurers are building more stable liability structures.

Change Four: Short-term Investment Income Pressure, Asset Allocation Divergence

Under new accounting standards, equity asset classification faces dilemmas: FVTPL (measured at fair value with changes recognized in current profit and loss) amplifies performance volatility, while FVOCI (measured at fair value with changes recognized in other comprehensive income) sacrifices short-term profits. Coupled with the ten-year government bond yield below 2%, fixed-income assets lack a safety cushion. Some well-capitalized insurers diversify their asset allocation to smooth returns, while less capable firms face “asset shortages.”

2. Analyzing Internal Contradictions: Three Core Tensions

Beneath these changes lie deeper structural conflicts.

Contradiction One: Agent Logic vs. Modern Demands

The past thirty years of rapid growth in life insurance relied on a simple formula: recruitment = revenue increase. More agents meant more customer resources and broader sales channels. This worked because insurance was a “new industry” with a blank market—those who moved fastest could dominate.

But today, this formula no longer holds. The issue isn’t agents themselves but changing demand.

As the first wave of insurance clients age, they need claims, renewals, and pension payouts. As the post-80s and 90s generations—raised with the internet—become main customers, information symmetry is high. They require professional, ongoing, customized solutions and services. Traditional “personal relationships” and “door-to-door” methods can no longer meet these needs; more specialized, detailed services are required.

Contradiction Two: Rigid Liabilities vs. Asset Volatility

The core of prudent life insurance management is cross-period asset-liability matching. This depends on predictable liability costs and assets that can cover them.

Now, both premises are loosening.

Liability side: Longer life expectancy means increased “expected lifespan,” translating into higher costs needing re-pricing.

Asset side: Low interest rates pressure investment returns. More complex is how to reflect equity assets under new accounting standards—seems impossible to balance both goals. Life insurers commit to long-term promises spanning decades, but capital market evaluations are quarterly, monthly, or daily. This “long vs. short” creates an irreconcilable contradiction.

Contradiction Three: Scale vs. Value

China’s life insurance expansion over the past thirty years has been driven by scale—market share, premiums, agent numbers. These metrics formed the industry’s evaluation basis.

But scale does not equal value. If scale equaled value, halving agent numbers should collapse the industry, but in reality, top insurers’ profits are rising.

This indicates that many “scales” were not solid to begin with—low-value policies, ineffective personnel, and coarse management during growth periods have been exposed during contraction.

Yet, inertia persists. When agents decline, many companies focus on “how to recruit more”; with product homogeneity, they tend to “follow competitors.” But the answers to these old problems are no longer in the old places.

3. Breaking the Deadlock: Evolving from “Selling Insurance” to “Managing Risks”

After recognizing these dilemmas, the key is to find breakthroughs.

The core function of life insurance has never been “selling policies” but “risk management.” However, this essence has been obscured during thirty years of rapid growth. Selling policies is a means; managing risks is the goal. When these are confused, the industry loses direction.

Transitioning from “selling insurance” to “risk management” involves three levels of reconstruction:

First Level: From Standardized to Customized Products

Past product logic was “what I have, you buy.” Future should be “what you need, I design.” Non-standard needs, dynamic health data-based pricing, scenario-based insurance products are no longer fringe markets but the main battlefield.

Insurers need to shift from “post-claim payouts” to “pre-emptive prevention,” from “static risk screening” to “dynamic risk control.”

Second Level: From Human-Driven to Professional-Driven Channels

The decline in agent numbers isn’t necessarily bad; it prompts industry reflection: what truly constitutes “channel capability”?

Previously, channel capability equated to “reach ability.” Whoever could reach more customers won. In the future, it will depend on “service ability”—who can solve customer problems.

As wealth management needs upgrade, customers are increasingly consolidating with professional institutions. They seek personalized, comprehensive solutions. Policies are just one part of the solution. This means agents must evolve from simple “product sellers” to professional “financial planners” and “health and elderly care managers.”

Third Level: From Profit Margin-Driven to Service-Driven Business Models

For a long time, interest margin was the main profit source. Cross-subsidies from interest spreads and fee spreads became industry norms. But this fragile model has been exposed: when interest rates fall and investment returns decline, profitability becomes unsustainable.

The real way forward is to strengthen the “three-wheel” profit model of interest margin, fee margin, and spread, and further develop service-driven revenue streams to find a second growth curve. Leading insurers are actively building ecosystems around healthcare, health, and elderly care, not only to enhance customer stickiness but also to create new income sources.

4. Observing the Changes: Who Will Lead the Breakthrough?

In the midst of difficulties, differentiation is happening.

Liability side is shifting focus from simple “premium funds” to the starting point of customer relationships and service ecosystems. After policy issuance, value is released through medical services, elderly care, and wealth planning.

Changes on the liability side must match asset side adjustments. Relying on a single asset class for returns—stocks in a bull market, bonds in a bear market—is no longer viable under low interest rates and high volatility. The future winners will depend on solid investment research capabilities, building “multi-asset, multi-strategy” allocation systems to optimize returns and manage volatility.

Only when the liability side locks in long-term customer value through service ecosystems, and the asset side achieves stable, professional allocation to cover liabilities, can life insurers build a truly healthy profit model.

The outcome of the future may be predetermined now. Companies at the forefront of evolution will continue to expand their market share; for them, the end of an era signals the beginning of another. Those clinging to old models will sink deeper into shrinking scales, agent attrition, and interest margin losses, facing a metaphorical dusk of the gods.

This article reflects only the author’s views.

(From Yicai Global)