Anxiety Marketing of a "Super Long-Term Time Deposit"

Recently, the Chinese insurance industry has been "making articles" around the decline in the predetermined interest rate.

Savings-type insurance, including participating insurance and annuity insurance, has been seizing the financial sales rankings under the "interest rate anxiety" sentiment.

Especially in a market where fixed-income and equity strategy products are "hard to sell," savings-type insurance is continuously "attracting funds" on banks and internet platforms.

Various types of "doomsday promotions" have emerged, fearing that investors will miss the interest rate points before the "rate cut."

Product packaging has become "flashy," with one type of savings-type insurance launching a sprint at the end of June.

However, after purchasing, investors have to wait several years to "break even"...

"Countdown" Marketing

Zhitang noticed that a well-known internet insurance sales platform launched a "doomsday promotion" on June 30.

This incremental life insurance product under a bank-affiliated insurance company once ranked second in the platform's hot-selling savings-type insurance list, second only to a participating insurance product from a major life insurance giant in Beijing.

In the image above, the product has promotional text stating "annual average return of 4.43%," "recommended holding period of 50 years," and "guaranteed return at maturity."

Zhitang also observed that as of 5 PM on June 30, four of the top ten hot-selling savings-type insurance products on the platform were incremental life insurance products. Currently, this product has been taken off the shelves.

In addition, sales personnel from large listed banks indicated that the focus is currently on recommending incremental life insurance products to clients.

What is Incremental Life Insurance?

Incremental life insurance, fully known as incremental whole life insurance, refers to a life insurance product where the insured amount increases annually at a fixed interest rate as stipulated in the insurance contract, and the cash value of the policy grows simultaneously during the validity period of the contract.

As a type of personal life insurance, incremental life insurance has the following two functions:

First, it provides personal risk protection: compensation for basic death and total disability;

Second, it reflects the savings and appreciation function: meeting the policyholder's phased financial needs, allowing for flexible withdrawals based on personal needs (such as children's education, retirement, policy loans).

Incremental life insurance is a type of savings-type insurance, which also includes participating insurance, annuity insurance, etc.

To explain in layman's terms regarding financial functions: incremental life insurance is similar to a "self-controlled piggy bank," where both the withdrawal time and amount are determined by the policyholder. Unlike participating insurance, which may "give more or less" (floating returns), or annuity insurance, which requires waiting until a "specified time" (such as 60 years old) to receive money.

"Yield at Age 105"

Another internet platform also conducted "countdown" marketing for the aforementioned incremental life insurance product, also ending on June 30.

The product page describes the annual average yield of the product as 3.34%, but where does this annual average yield come from? What exactly does it define? The most prominent part of the display page does not clearly indicate this

It is worth noting that in the subsequent pages, the promotion of this increasing death benefit life insurance product prominently displays more information about the average annual yield.

The following pages use Ms. Yao, who is 30 years old, as an example, showing that she makes a one-time premium payment of 20,000 yuan, and by the age of 50 (which is after 20 years), the cash value will roll over to 31,396 yuan, with an average annual yield marked at 2.84%.

Another scenario in the above calculation shows that if Ms. Yao reaches the age of 105, her average annual yield could increase to 6.8%.

But is 105 really an appropriate and suitable age to showcase?

The "Script" of Compound Interest Appreciation

Zhi Shi Tang communicated with the insurance customer service through the above internet channels, and the other party sent promotional text for the increasing death benefit life insurance product.

(As shown in the above image) "According to personal budget, if the budget is limited, you can choose to pay in installments over 3/5 years; if the budget is sufficient, you can choose to pay in a lump sum, which yields relatively higher returns. The product has a 2.5% lifetime compound interest appreciation on the coverage amount, and the longer you hold it, the higher the returns."

The description of compound interest appreciation appears here. Since increasing death benefit life insurance is a savings-type insurance, if the core demand of consumers is long-term stable savings, it may mislead consumers.

From a savings perspective, consumers focus on the compound interest appreciation related to the actual money they can receive, which is the cash value, but the above marketing script corresponds the compound interest to the coverage amount.

The "compound interest appreciation" of the coverage amount is different from the compound interest of investment returns; the former refers to the growth rate of the payout amount promised in the event of the insured's death or total disability.

In the insurance field, the coverage amount and cash value are entirely different concepts. For policyholders who have a need to get their money back, the cash value is the most important, representing the money they can truly "get back" when surrendering or reducing the policy.

The growth of the coverage amount refers to the payment limit when a claim occurs (the payout amount for death, etc.), and the realization of the latter has many preconditions.

"Breaking Even" in Several Years

In the promotional text from the above internet channel, "the longer you hold it, the higher the returns" corresponds to the product's coverage amount, rather than the cash value that truly meets the savings needs.

In fact, after purchasing this increasing death benefit life insurance product, consumers will experience a phase where they may encounter a situation similar to "capital loss," which is, of course, a norm for such insurance products.

According to the example in the product brochure, Mr. Zhang, who is 35 years old, pays an annual premium of 20,000 yuan for 5 consecutive years, and the cash value of the policy changes as follows:

Observing the above image, it can be seen that Mr. Zhang paid the first year's premium of 20,000 yuan, and by the end of the year, the cash value of the policy was 8,058 yuan, which is less than half of the first year's premium.

However, thereafter, the cash value of the policy will continue to grow, but it will not catch up with the amount of premiums paid. For example, by the end of the fifth year, Mr. Zhang had paid a total of 100,000 yuan in premiums, but at this time the cash value was 96,900 yuan.

It wasn't until the sixth year, after Mr. Zhang stopped paying premiums, that the cash value of the policy would exceed his contributions.

Therefore, as mentioned above, due to the various costs involved in the creation of the policy, there is considerable uncertainty about whether a policyholder can successfully "break even" if they wish to exit the insurance contract midway.

Just like Mr. Zhang, if he needed funds urgently and chose to cancel the policy at the end of the fifth year after paying premiums for five years, it is highly likely that he would not be able to recover his principal.

Looking back, do some of the insurance advertisements that mention "fast cash recovery, no worries for temporary funds" adequately reveal the risks involved?

"Anxiety-Inducing" Delisting Alerts

In addition to the aforementioned wording that can be "negotiated," many insurance product promotional webpages feature various flashy "delisting alerts."

For example, some internet platforms displaying the aforementioned increasing benefit life insurance products not only have statements like "will be delisted soon," but also include a "delisting countdown" clock.

There are even considerate "delisting alert" prompts:

"If the future drops to a 2.0% guaranteed interest rate, the returns may decrease by 41%." (as shown in the image below)

Such arrangements can certainly encourage some interested customers to convert into actual policyholders, but is this description appropriate?

"Dazzling" Professional Terminology

Observing the above policy, it can be noted that the promotional page of the policy contains many terms that are familiar to the average person, but the actual concepts may differ from everyday conversations.

For example, the "guaranteed interest rate" mentioned earlier.

At first glance, some financial consumers might think it refers to something similar to a savings interest rate. However, it is more like a parameter that is conventionally agreed upon in the industry.

Still, let's take an example from the sale of financial products on the internet. Many webpages frequently mention that the current industry guaranteed interest rates are in a downward phase, and savings-type insurance products are using this as a marketing "selling point," encouraging potential consumers to "get on board" before the rates drop Especially recently, many webpages and articles frequently describe that the guaranteed interest rate is 2.5%, which may drop to 2.0% within the next two months, while significantly highlighting the impact of both on the contract value.

However, the use of the declining window of the guaranteed interest rate in the promotion of increasing death benefit products has a certain "confusing space."

To put it more directly, this 2.5% is not the same as that 2.5%!

The product brochure states the following:

Effective insurance amount: The effective insurance amount in the first policy year of this contract is the same as the basic insurance amount. Starting from the second policy year, the effective insurance amount for each policy year increases by 2.5% based on the effective insurance amount of the previous policy year.

The calculation formula is as follows: Effective insurance amount = Effective insurance amount of the previous policy year × (1 + 2.5%)

It can be seen that in the above contract, the amount of compound growth at the guaranteed interest rate of 2.5% is the insurance amount (referred to as the death benefit), which is the amount paid to the insured in case of death or total disability.

In other words, regardless of the level of the guaranteed interest rate, it is unrelated to the amount of money the policyholder wants to withdraw (i.e., cash value).

The actual amount of cash the policyholder can retrieve in the meantime needs to be carefully read in the cash value table in the contract (which can calculate the money that can be accessed at any time), completed by a licensed actuary from an insurance company.

At this point, a savings-type insurance product involves the book figures (the compensation amount for death/total disability) and the "real cash" that can be retrieved while alive, which are entirely different.

Do not be misled by sales pitches that create anxiety!

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at your own risk