The "twilight" of interest rates: Chinese households are using "one-time payments" to counter the wave of interest rate cuts

Ultra-long-term government bonds, the longest-term large-denomination time deposits, and even lifelong life insurance policies, are becoming the choice of some "prophetic" Chinese families.

Since 2023, the continuous decline in interest rates has made many investors increasingly sensitive to the yields of deposits and wealth management products.

This process has led to two seemingly contradictory situations.

On one hand, depositors and wealth management investors continue to chase "stable return" products. In the first half of 2025, the total deposits of 42 listed banks reached a historical high of 213 trillion yuan, with a year-on-year growth rate of 8.3%.

On the other hand, the average deposit interest rates of major listed banks continued to decline significantly compared to the previous year, with a drop of 34 basis points within a year.

If last year, depositors could purchase fixed deposits or large-denomination time deposits at an annual interest rate of around 2%, a year later, the deposit interest rate has dropped to 1.6%.

With the downward trend in deposit interest rates still ongoing, investors are forced to make a choice: either accept the continuously declining savings and deposit rates or seek other avenues.

And the "insurance policies" that ordinary people can easily access seem to have become a natural choice.

Life Insurance Products "One-time Payment" Surge

For most domestic insurance buyers, reading the periodic reports of the insurance companies they are insured with is not a common action.

No worries, we will read it for you.

The semi-annual report for 2025 shows that the overall operations of insurance companies are improving, with significant growth in investment income due to the strengthening of the domestic stock market.

However, there is one easily overlooked detail item—lump-sum payment for life insurance—which shows an exceptionally unusual change in the 2025 semi-annual report.

Taking China Life's 2025 semi-annual report as an example, this figure jumped from 4.926 billion yuan in the same period last year to 20.028 billion yuan, a year-on-year increase of over 300%.

A similar situation is also reflected in the semi-annual report of New China Life Insurance. Zhi Shi Tang noted that in the first half of 2025, the lump-sum payment amount for long-term insurance reached 14.094 billion yuan, compared to 3.109 billion yuan last year, also achieving more than three times growth.

Lump-sum payment (dun jiao) simply means "paying all premiums in one go."

Why did policyholders choose to pay their premiums in full in the first half of 2025?

Why the Frequent "One-time Payments"?

The answer is simple: this is the "active choice" of investors in the current environment It should be noted that when paying for insurance premiums, policyholders can also choose to pay in installments—either annually or monthly—which is clearly more suitable for working individuals.

For the majority of policyholders, matching premium payments with personal income to avoid a large one-time cash outflow is a more logical choice. This has been similar to mortgage repayments over the past few decades.

Unless there are significant benefits to doing so or it can avoid substantial drawbacks.

Believe it or not, there really are.

Firstly, in life insurance products, the difference in payment models directly affects investment results.

Although the predetermined interest rate, once written into the contract, is locked in and will not change due to subsequent market interest rate declines, whether the payment is a lump sum or in installments has a significant impact on the return rate that the customer ultimately receives.

The real difference lies in the timing of the funds being available.

A lump sum payment means that the principal invested in the policy enters the insurance account in full on the first day of payment, immediately starting to accrue interest at the predetermined rate, with the compounding effect fully realized from the very first moment.

In contrast, while the interest rate conditions remain unchanged for installment payments, the principal is added gradually each year. With lower initial contributions and funds not fully available for a long time, the principal benefiting from compounding is diminished, naturally leading to a weaker compounding effect.

Moreover, the long-term downward trend in interest rates over the past few years has exacerbated this difference in returns.

Let’s do a simple calculation:

Mr. Lin chooses a lump sum payment, investing 100,000 yuan on the first day, compounded at an annual interest rate of 3%, which will total approximately 180,000 yuan after 20 years.

Mr. Wang chooses to pay in installments, contributing 10,000 yuan annually for 20 years, also calculated at a 3% annual interest rate, which will total approximately 130,000 yuan at maturity.

With the same interest rate and contract conditions, the final difference exceeds 50,000 yuan, meaning Mr. Lin received nearly 40% more in returns compared to Mr. Wang.

Therefore, the logic of lump sum payment customers is very simple: In a declining interest rate environment, invest the principal as early and fully as possible to lock in the time value of compounding and preserve the purchasing power of personal assets.

The Investment Dilemma for Insurers

The influx of premiums is a "double-edged sword" for insurance companies:

On one hand, selling policies and expanding business is a good thing.

On the other hand, every penny of premium from life insurance policies corresponds to long-term expenditure needs, especially when market interest rates are continuously declining. For the investment teams of insurance companies, the time window to balance income and expenditure needs may "vanish in an instant," requiring higher investment skills.

In recent years, insurance companies have been focusing on one thing—strengthening investment management and research efforts.

Many large insurance enterprises are doing two things:

The first is to invest money into the market as early and as much as possible, targeting stable and long-term assets to lock in some yield, which helps with subsequent business development.

The second is to seek more higher-yield assets with a certain level of assurance. In recent years, the insurance capital industry has continuously directed funds towards high-dividend state-owned leading enterprises and gold-related assets, and the reasons are here At the same time, the insurance industry is actively striving to lower the predetermined interest rates of policies.

By the end of July 2025, the Insurance Association disclosed at the quarterly expert consultation meeting that the current research value of the predetermined interest rate for ordinary life insurance products is 1.99%, a decrease of 14 basis points from before. In January and April of this year, this research value was already lowered to 2.34% and 2.13%, respectively.

In other words, the predetermined interest rate has been lowered three times this year, dropping from last year's 2.50% to 1.99%, with a cumulative decrease of over 50 basis points.

Such a dense and significant reduction is rare in the history of the Chinese insurance market.

Banks Become the "Behind-the-Scenes Driver"

The explosion of "one-time payment" in life insurance is also related to the silent push from banks. This trend can be clearly seen in the semi-annual reports of several large listed insurance companies.

The "bank insurance channel" in insurance company financial reports refers to the sales figures of products placed in bank outlets and sold by banks on behalf of the insurance companies.

In the semi-annual report of New China Life Insurance, the overall sales figures from the bank insurance channel have risen rapidly, with the amount of "lump-sum payment (one-time payment)" surging nearly four times year-on-year.

To some extent, the surge in lump-sum payments through bank channels has become the biggest driving force behind the increase in lump-sum payments by insurance companies themselves. This may indicate that customers in bank channels have received relatively more "professional guidance," making them more inclined to use lump-sum payments to avoid subsequent challenges from declining interest rates.

China Life Insurance is similarly positioned: the scale of lump-sum payments through the bank insurance channel soared from about 4.1 billion yuan in the same period last year to 18.6 billion yuan, an increase of nearly four times. Bank outlets are becoming an important entry point for customers to migrate their financial assets.

The data from China Pacific Insurance is even more comparative: the lump-sum payments through the individual insurance channel have actually declined, but the bank insurance channel continues to maintain steady growth, with its contribution increasing.

It can be seen that the popularity of "one-time payment" in life insurance is not an isolated phenomenon, but rather a systematic push from banks behind the scenes. As interest rates continue to decline, when customers seek alternative financial products at bank counters, life insurance products have naturally taken over this portion of funds.

In other words, while the data for life insurance seems to come from insurance companies, what stands behind it is the "migration" of bank financial entry points, which appears quite normal in the context of the ongoing downward trend in savings rates.

Risk Warning and Disclaimer

The market has risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk