Insurance-Banking Channel "Variations": Dividend Insurance with 1.75% Guaranteed Floor Becomes Banks' "Top Product"

Why are banks actively promoting dividend insurance products under low interest rates?

By reporter Tu Yinghao; edited by Liao, Dan

“Let me recommend our best-selling product to you. It’s essentially a forced savings plan that can provide good returns in the future. This product has a guaranteed minimum interest rate of 1.75%, plus a floating dividend component, with a demonstrated interest rate of 3.3% to 3.4%.” In mid-March, at a bank branch in Shanghai, financial manager Zhang Yuan was enthusiastically recommending a 5-year dividend insurance product to a customer.

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What’s a good product to buy with idle funds? Recently, the Daily Economic News visited several banks in Shanghai, including state-owned banks and joint-stock banks, and found that insurance products are currently the hottest category. Dividend insurance with a 1.75% guaranteed rate has become the key product promoted across banks, mainly including dividend annuities and dividend whole life insurance.

“Currently, banks and insurance companies are increasing efforts to promote dividend insurance, which is a temporary industry trend,” said Liao Zhiming, chief fixed-income analyst at Huayuan Securities, in an interview with the Daily Economic News. On one hand, deposit interest rates are low, and dividend insurance products with a guaranteed minimum interest rate are attractive in the wealth management market (note: dividend insurance is fundamentally insurance, not purely financial products, but it has certain financial attributes). On the other hand, last year’s strong stock market performance allowed dividend insurance to show relatively attractive returns to clients. Additionally, insurance products can generate higher intermediary business income for banks.

Dai Zhifeng, director of the China Securities Research Institute, told reporters that under the backdrop of declining deposit interest rates, insurance products are more easily packaged as “locked-in terms, locked-in expectations, and reduced perceived volatility,” making them more resonant with clients’ asset allocation decisions at the beginning of the year.

Cold Reception for Universal Life Insurance

Recently, the reporter visited seven banks in Shanghai, including state-owned, joint-stock, and city commercial banks. For clients’ idle funds, the bank managers uniformly recommended insurance products.

“Term insurance products usually have a 10-year or longer term, making them more suitable for young people. They can serve as a forced savings tool, helping with future financial planning—such as dedicated funds for children’s education or as a supplement to retirement savings,” said a wealth manager at Shanghai Pudong Development Bank.

From the perspective of asset allocation, a wealth manager at China Construction Bank sees insurance as a defensive product that provides asset protection. “Standard insurance products had an interest rate of about 4.0% in 2023, and although it has now dropped to around 2.0%, it still exceeds current long-term deposit rates,” he said.

Compared to insurance, other financial products are less popular. For example, a manager at Shanghai Bank said that the main issue with large-denomination certificates of deposit is the decreasing interest rates. The highest rate for a large CD in this period is 1.75%, nearly halving from about 3.4% three years ago.

The bank’s wealth managers also recommend insurance products, but they prefer dividend products with a guaranteed minimum interest rate over ordinary life insurance with a 2.0% guaranteed rate. First, dividend insurance accounts are regulated to distribute part of the earnings as dividends. Second, choosing larger insurance companies with more mature business models can lead to more substantial dividends. Lastly, even if some products’ dividend rates often don’t reach the demonstrated rate, as long as the payout rate is around 20% to 30%, it still outperforms fixed-income products.

Dividend insurance with a 1.75% guaranteed rate has become a popular recommendation. For example, a wealth manager at China Merchants Bank recommended a dividend annuity insurance with a guaranteed rate of 1.75%, and a floating component calculated at 1.45%, resulting in a demonstrated rate of up to 3.2%.

A wealth manager at CITIC Bank recommended a dividend whole life insurance product with the same 1.75% guaranteed rate. Including dividends, the demonstrated rate can reach 3.75%, based on a 145% dividend payout rate last year, with actual client yields around 3.5%.

Additionally, several other banks’ wealth managers have recommended similar dividend insurance products.

During visits, the reporter found that universal life insurance, which also features floating returns, is not recommended by wealth managers. “I don’t recommend buying universal life insurance. Few universal policies achieve expected returns; it’s better to buy dividend insurance that offers both fixed and floating returns,” said a bank wealth manager.

In recent years, universal life insurance once became a key asset allocation target for residents, thanks to its higher yields compared to bank deposits and wealth management products, and was seen as a “high-interest alternative to savings.” However, as interest rates continued to decline, the interest rate centrality of universal life products also fell, with many products’ settlement rates reaching the guaranteed minimum, greatly reducing their appeal.

Seasonal Factors Dominate

Why are insurance products heavily promoted at the start of the year?

Dai Zhifeng believes that savings-type insurance, especially dividend insurance, naturally tends to see concentrated efforts at the beginning of the year. This is due to the long-standing “opening success” habit in insurance sales, where the start of the year often involves the breakdown of annual new policy targets, with product supply, marketing resources, training, and channel incentives all favoring the first quarter. Therefore, frontline sales staff tend to prioritize promoting insurance products.

He notes that unlike the routine of “opening success” in insurance sales, the scale of wealth management products is more influenced by reallocation of existing clients and market fluctuations, not solely by the bank’s promotional focus at the start of the year. From the retail client perspective, customers are usually more concerned about whether the returns are easy to understand, whether the volatility is tolerable, and whether the holding experience is stable. Insurance products are easier for clients to understand as “tools that exchange liquidity for certainty,” making them more likely to close sales.

Multiple sources indicate that, besides seasonal factors, banks’ strong push for dividend insurance sales is driven by several reasons.

First, in an environment of narrowing interest margins and pressure on traditional profit models, bancassurance sales can effectively increase intermediary income, becoming an important profit growth point and aligning with the urgent need to boost non-interest income. For insurance companies, under the “reporting and operating integration” policy and standardized commission systems, bancassurance channels—thanks to extensive branch networks, deep customer bases, and high customer acquisition efficiency—bring both scale and value growth.

Second, the increasing reallocation needs of bank deposits by 2026 inject new momentum into bancassurance. Industry analysts believe that low-risk preference funds may flow into safer, yield-flexible bancassurance products. Guojin Securities estimates that the incremental funds in bancassurance channels in 2026 will show a “high first, then low” pattern: January, Q1, and the whole year will see incremental funds of 305.7 billion yuan, 509.4 billion yuan, and 1.115 trillion yuan, respectively.

Third, insurance firms are intensifying their strategic focus on the bancassurance dividend insurance market. As product interest rates in the insurance market adjust, standard life insurance products’ guaranteed interest rates have fallen to 2.0%. During visits, it was found that main products in the bancassurance market have shifted to dividend insurance with a guaranteed rate of 1.75%. Professor Zhu Junsheng, a postdoctoral fellow in applied economics at Peking University, explained that the “guaranteed plus floating dividend” structure of dividend insurance can reduce insurers’ rigid liability pressure, retain long-term yield potential for clients, and enhance the flexibility of insurance funds’ asset allocation. In a low-interest-rate environment, the “low guarantee, strong floating” product model is becoming an important industry trend.

Interest Rate Still Under Downward Pressure

Compared to the booming sales of bancassurance products, the scale growth of wealth management “opening success” at the start of this year has been somewhat sluggish. On the ground, the promotion of wealth management products at bank branches is not very vigorous.

The 2025 China Banking Wealth Management Market Annual Report shows that by the end of last year, the outstanding balance of bank wealth management products reached 33.29 trillion yuan. The product structure is dominated by fixed income and hybrid products, with asset allocation shifting toward more public fund and bank deposit investments. The average yield of products first fell below 2%. Industry data indicates that in January 2026, the total outstanding wealth management product balance actually declined, despite a slight recovery in February, the growth in the first two months remains modest compared to previous years.

Dai Zhifeng analyzed for the Daily Economic News that the wealth management market did not “fully strengthen” in February but rather “recovered after a weak January.” This recovery was mainly driven by three factors:

First, the withdrawal of seasonal disturbances. January’s wealth management scale lacked the usual “opening success” boost because early-year bank on-balance sheet deposits, loan disbursements, pre-holiday preparations, and liquidity arrangements all temporarily squeezed the market’s capacity. By February, as the Spring Festival effects waned, some short-term and liquid funds that had flowed out earlier naturally returned, leading to a “redeem and re-invest” recovery rather than a shift in sales focus.

Second, the returning funds mainly flowed into low-volatility wealth management products rather than high-risk ones. The market’s February rebound was primarily driven by cash management and fixed income products, indicating that the market’s recovery was more about low-risk funds finding a “slightly enhanced but still relatively stable” destination after the holiday.

Third, wealth management firms actively reduced fees and improved client experience. Since the beginning of the year, these firms have been lowering costs and optimizing product structures—through cash management, fixed income foundations, and moderate multi-asset strategies—to enhance product attractiveness.

Regarding the February market rebound, Liao Zhiming believes that many companies distributed year-end bonuses in February, prompting residents to deposit these funds into fixed deposits or wealth management products.

It’s worth noting that the 1.75% guaranteed rate for dividend insurance faces downward pressure, prompting bank sales staff to accelerate promotion efforts. A wealth manager revealed that insurance companies are expected to launch new dividend insurance products with guaranteed rates below 1.75%. Another bank wealth manager said that future dividend insurance guaranteed rates might continue to decline.

Zhu Junsheng pointed out that the decline in dividend insurance guaranteed rates will accelerate industry transformation. It also indicates a fundamental shift in the competitive logic of the life insurance industry. Previously, competition relied heavily on interest rate levels, but moving forward, the industry will focus more on comprehensive capabilities, including long-term investment ability, asset allocation, product service quality, brand strength, and stable operations. In other words, the industry is gradually shifting from “interest rate-driven” to “asset management capability-driven” competition. From a sales perspective, future market focus will increasingly shift from guaranteed interest rates to long-term indicators like dividend realization rates, reflecting the industry’s investment strength. (Intern Cheng Xuebing also contributed to this article)

Daily Economic News