China's participating life insurance policies are set to receive their first-ever unified industry model clauses.

Recently, the China Insurance行业协会 issued three draft exposure documents for public comment: the Participating Whole Life Insurance Model Clause, the Participating Endowment Insurance Model Clause, and the Participating Annuity Insurance Model Clause. Feedback on these drafts must be submitted by September 30, 2026.

In recent years, driven by economic and social development, growing resident demand for wealth management, and an increasingly diversified life insurance product landscape, participating policies have played a more prominent role in meeting needs for risk protection and long-term stable wealth management. The release of these three model clauses aims to establish a standard industry format for floating-benefit insurance products, standardize common terminology used in participating policies, guide sales and disclosure practices, and improve the accessibility, fairness, and consumer-friendliness of insurance services, thereby better protecting the legitimate rights and interests of policyholders.

Demystifying the Dividend Logic

Model clauses serve as industry-recommended reference texts standardizing the content of insurance contracts. Previously, the association had already published model clauses for ordinary insurance products such as term life and whole life policies. The new participating insurance model clauses represent a continuation and completion of this standardization framework.

Specifically, each of the three participating insurance model clauses contains 32 articles. In standardizing key terms, the model clauses unify the wording for items related to dividend rights, including "sum insured," "policy dividends," "cash value," "suspension and reinstatement of coverage," and "outstanding amounts," embedding dividend explanations into each relevant article. For example, the sum insured article clarifies the impact on the insured amount of paid-up additions under cash dividends (where the policyholder converts policy dividends into additional coverage through a single premium payment) and of dividend additions (where the insurer distributes surplus to the policyholder in the form of increased coverage). The policy dividend article clarifies dividend sources, distribution methods, accumulated interest, premium offsetting, paid-up additions, annual dividends, and terminal dividends. By standardizing this key information, consumers can more easily understand the dividend mechanics, boosting transparency.

In strengthening dividend information disclosure, the model clauses fully account for industry practices and consumer protection needs. For example, for cash dividend paid-up additions and dividend addition policies, they explicitly require the contract to state the calculation basis table for the cash value corresponding to the dividend at the end of each policy year, enhancing consumer rights to information at the point of purchase. At the same time, the model clauses treat "participation of paid-up addition insurance in dividend distribution" and "policyholder entitlement to accumulated dividend interest during a policy suspension period" as optional provisions, offering standard language for industry practice while retaining a degree of flexibility in real-world handling by insurers.

In safeguarding consumer choice, the three draft model clauses cover the major participating insurance categories currently on the market. By unifying the clause framework, consumers can more easily compare different product types horizontally. By standardizing expressions for "coverage responsibilities" and "annuity payment methods, frequencies, and start dates," the clauses protect consumer rights to information and fair dealing, facilitating selection of products best suited to individual needs.

In improving the readability of policy terms, the model clauses standardize general provisions, keeping articles such as "contract composition," "scope of coverage," "cooling-off period," "exclusions," "other exemption clauses," and "definitions" consistent with the existing model clauses for ordinary term life and whole life products. This strengthens standardization of the general module, ensuring consistent expression of basic rights and obligations and enhancing reading coherence across multiple policy types for consumers.

Rapid Premium Growth Necessitates Standardized Development

Behind the public consultation on these model clauses lies the remarkable surge in participating policy premium volumes. According to industry data from the China Insurance行业协会, in the first half of 2026, original premium income from participating policies reached ¥1.0126 trillion, a year-on-year increase of 94.4%. During the same period, total original premium income for life insurance companies stood at ¥2.87 trillion, up 3.6% year on year.

"Participating policies have developed rapidly and become a key direction for life insurers' product transformation," said Yang Fan, General Manager of Beijing PaiPaiWang Insurance Agency Co., Ltd. He noted that following market expansion, product terms and sales services require further standardization. Yang explained that participating policies feature both guaranteed benefits stipulated in the contract and uncertain dividend distributions. Differences exist across companies in dividend payment methods, cash values, and surrender rules, making comparison and understanding difficult for consumers. The sales process, in particular, requires careful distinction between guaranteed and non-guaranteed benefits to avoid consumers mistaking illustrated returns or historical dividend payout ratios for certain future income.

In Yang's view, these model clauses will help unify the wording and structure of basic contract terms, making policy benefits, dividend distribution, and contractual rights and obligations clearer, while providing insurers with a reference standard for product development and sales disclosures.

Long Ge, Deputy Director of the Innovation and Risk Management Research Center at the University of International Business and Economics, also noted that participating insurance products currently use divergent wording across the market. He pointed to common problematic practices, such as marketing "non-guaranteed dividends" as "quasi-fixed income" or describing terminal dividends or paid-up additions as "guaranteed returns," which have led to a surge in disputes and complaints over participating policy payouts. "The model clauses fill the gap in standard reference texts for participating policies. Combined with the 2026 life insurance 'negative list' and the reduction of the illustrated rate cap to 3.5%, they form a coordinated regulatory approach to curbing pre-sale misrepresentation and after-sale disputes at the source," Long said.

What impact will the model clauses have on insurers and consumers? Yang noted that for insurance companies, the model clauses help reduce differences in basic contract wording, enhancing the standardization of product development, compliance review, and sales training. As participating policies account for a growing share of sales, insurers must not only design clear product terms but also maintain consistency in benefit illustrations, dividend information disclosure, and long-term customer service—avoiding a sole focus on potential returns during the sales process.

"For consumers, more unified and clearly worded base clauses facilitate understanding of the difference between guaranteed and non-guaranteed benefits, and make comparing different products more convenient," Yang added. He cautioned that the model clauses do not mean dividend yields across companies will converge, nor do they guarantee dividend payments. Consumers selecting products should still consider their own investment timelines and protection needs, examining the guaranteed benefits, surrender losses, dividend distribution rules stipulated in the contract, and the insurer's long-term operational strength.

Long believes that in the long run, competition among insurers will shift from sales tactics and illustrated rates to dividend account management and long-term investment capabilities. Consumers should note that the model clauses are industry self-regulatory texts that do not affect existing policies. For new policies, the official contract terms and dividend payout ratios remain the definitive reference.