From "selling insurance policies" to "managing risks," the life insurance industry has reached a "crossroads."

Ask AI · How will the life insurance industry reconstruct its business model by shifting to risk management?

(This article is written by Yang Jun, a senior finance professional)

The “2025 Insurance Industry Operational Situation” report released by the National Financial Regulatory Administration shows that in 2025, the original premium income of China’s life insurance sector will reach 4.36 trillion yuan, a year-on-year increase of 8.9%. However, behind this seemingly bright performance lies a mixed bag of challenges and opportunities. On one hand, there is a “new trend” of deposit migration, cost optimization, and high customer dividends; on the other hand, there are the “old problems” of agent attrition, risks from interest spread losses, and pressures on the investment side. This is not merely a cyclical fluctuation but a signal that the industry, after thirty years of rapid growth, is standing at a crossroads of “letting go of the old and welcoming the new.”

I. On the Surface: Four Major Changes

The life insurance industry is currently experiencing four significant changes.

Change One: Agents “Decrease in Quantity, Increase in Quality”

The “human wave tactic” that the insurance industry relied on in the past is gradually losing effectiveness. From 2019 to 2024, the number of agents plummeted from 9.12 million to 2.64 million. However, at the same time, leading insurance companies are actively recruiting top talent from investment banks, law firms, and other industries with high salaries, and combined with the empowerment of AI technology, the individual productivity of agents has significantly improved.

Change Two: Products Moving from Homogenization to Layered Breakthroughs

Opening the product catalog, critical illness insurance and medical insurance remain highly homogeneous, and price wars have led to paper-thin profits. At the same time, the low-interest-rate environment is driving “deposit migration.” With their long-term stable returns, insurance products have become an important option for residents’ conservative financial management, leading to an explosion in demand for savings-type insurance. As healthcare reform deepens, it also opens up new spaces for health insurance, with innovative products like illness-specific insurance and long-term care insurance emerging rapidly. The product structure is shifting towards a “savings + protection” dual-drive model.

Change Three: Rigid Decline in Liability Costs, Gradual Resolution of Interest Spread Loss Risks

By 2025, the population of individuals over 60 in China will exceed 323 million, with life expectancy increasing and aging deepening. The historical cost pressure of claims from insurance policies is indeed substantial, but fortunately, the liability costs of new business have been effectively controlled. Under policies such as “integration of reporting and operation” and “reform of life insurance scheduled interest rates,” industry competition on costs has returned to rationality, and the cost of liability capital has been significantly compressed. Meanwhile, by increasing the proportion of participating insurance and health insurance products, insurance companies are building a more robust liability structure.

Change Four: Short-term Pressure on Investment Returns, Differentiated Asset Allocation Capabilities

Under the new accounting standards, the classification of equity assets is caught in a dilemma: FVTPL (Fair Value Through Profit or Loss) amplifies performance volatility, while FVOCI (Fair Value Through Other Comprehensive Income) sacrifices short-term profits. Coupled with the 10-year treasury yield hovering below 2%, the safety net for fixed-income assets is insufficient. It is challenging for the investment side to achieve “both stability and performance.” Some insurance companies with stronger professional capabilities are smoothing out return fluctuations through diversified allocation, while institutions with inadequate investment capabilities are caught in an “asset scarcity” dilemma.

II. Examining the Inner Conflicts: Three Contradictions

Beneath these changes are deeper structural contradictions.

Contradiction One: Mismatch Between Agent Logic and the Times

The rapid growth of the life insurance industry over the past thirty years was built on a simple formula: increasing agents = increasing revenue. The more agents there are, the more customer resources can be brought in, expanding sales channels. This model was valid because at that time, insurance was still a “new industry,” and the market was blank; whoever ran faster could occupy the territory.

However, this formula has failed today. The reason lies not with the agents themselves but with changes on the demand side.

As the first wave of insurance customers enters old age, they require claims processing, renewals, and pension withdrawals. When the post-80s and post-90s generations, who grew up with the internet, become the main consumer group, information has become highly symmetrical. They now need professional, continuous, customized solutions and services. These demands can no longer be met by traditional “personal connections” and “door-to-door sales”; they require more professional and detailed services.

Contradiction Two: Rigid Liabilities and Asset Volatility Mismatch

The essence of stable operation in the life insurance industry is the inter-temporal matching of assets and liabilities. The premise of this model is that the costs on the liability side are predictable and the returns on the asset side can cover them.

Now, both premises are becoming loosened.

On the liability side, as people live longer, the additional “expected lifespan” reflects, on the books, as costs that need to be repriced.

On the asset side, investment returns are pressured in a low-interest-rate environment. What is even more challenging is how to reflect equity assets under the new accounting standards, which seems to offer no “win-win” solutions. The life insurance industry bears long-term commitments spanning decades, but the evaluation cycle in capital markets is calculated on a quarterly, monthly, or even daily basis. This “long and short” creates an irreconcilable contradiction.

Contradiction Three: The Battle Between Scale and Value

The expansion of China’s life insurance industry over the past thirty years has been typically scale-driven. Market share, premium income, and the number of agents form the basis of industry evaluation.

However, scale does not equal value. If scale equated to value, then a halving of the number of agents should lead to the industry’s collapse, but that is not the case; instead, profits of leading insurance companies are increasing.

This indicates that much of the past “scale” was not solid enough. Low-value policies, ineffective manpower, and loose management—these problems, masked during the industry’s growth phase, have been laid bare during its contraction.

Yet the inertia of scale thinking remains. Faced with declining agents, many companies’ first reaction is “how to increase agents,” and when confronted with product homogenization, the first reaction is “to follow competitors.” But the problem is precisely that the answers to these old issues are no longer found in the old places.

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

After recognizing the predicament, it is necessary to find the breakthrough point.

The core function of the life insurance industry has never been “selling policies,” but rather “managing risks.” However, in the past thirty years of rapid growth, this essence has been obscured. Selling policies is a means; managing risks is the goal. When the means and the goal become confused, the industry loses direction.

The transition from “selling insurance” to “managing risks” signifies a reconstruction on three levels:

First Level: Products Shifting from Standardization to Customization

The past product logic was “What I have, you buy”; the future logic should be “What you need, I design.” Non-standard demands, dynamic pricing of health data, and scenario-based insurance products are not niche markets but the true main battleground of the future.

Insurance companies need to shift from “post-event compensation” to “pre-event prevention,” and from “static risk selection” to “dynamic risk management.”

Second Level: Channels Shifting from Labor-Driven to Professional-Driven

The decrease in the number of agents is not a bad thing; it forces the industry to think about what true “channel capability” is.

In the past, channel capability equated to “reach capability.” Whoever could reach more customers would win. In the future, channel capability will depend on “service capability”; whoever can solve customer problems will win.

As the demand for wealth management upgrades, customers are accelerating their concentration towards professional institutions. In the future, customers will require personalized comprehensive solutions. Policies are merely one of the carriers of these solutions. This means agents need to transition from simple “product sales” to professional “financial planners” and “health and elderly care managers.”

Third Level: Business Models Shifting from Interest Spread-Driven to Service-Driven

For a long time, the interest spread has been the primary source of profit for the life insurance industry. Using interest spreads to subsidize mortality and expense differences has become the norm in the industry. The fragility of this model has been exposed: when interest rates decline and investment returns are pressured, past profit models become unsustainable.

The true way out lies in consolidating the profit model driven by the “three wheels” of mortality, expense, and interest spread. On this basis, further expanding service-driven profit sources to seek a second growth curve is essential. Currently, leading insurance companies are actively laying out healthcare, health, and elderly care ecosystems; their strategic intent is not only to enhance customer stickiness but also to create entirely new revenue sources.

IV. Observing the Changes: Who Will Break the Deadlock First

Amidst the difficulties, differentiation is occurring.

On the liability side, the focus is no longer merely on “premium funds,” but on the starting point of customer relationships and the entry point of the service ecosystem. After the sale of a policy, medical services, elderly care, and wealth planning are where value is released.

The changes on the liability side will inevitably require matching changes on the asset side. In the past, many insurance companies relied on a single asset class to gain returns, relying on stocks in bull markets and bonds in bear markets. However, under the dual pressure of low-interest rates and high volatility, this “relying on the environment” model has become difficult to sustain. The future winners must rely on solid investment research capabilities, building a “multi-asset, multi-strategy” allocation system to find the optimal solution between returns and volatility.

Only when the liability side locks in long-term customer value through the service ecosystem, and the asset side traverses cycles through professional allocation to cover liability costs, can life insurance companies hope to establish a truly healthy profit model.

The future’s outcomes may very well find their roots in this moment. Companies at the forefront of the evolutionary wave will continue to increase their market share; for them, the end of one era marks the beginning of another. Those clinging to old models will find themselves increasingly trapped in a vortex of declining scale, agent attrition, and interest spread losses, facing the twilight of the gods.

This article only represents the author’s views.

(This article comes from Yicai)