Recently, the Banking and Insurance Regulatory Commission issued to the life insurance companies "on the development of life insurance and long-term care insurance liability conversion business pilot Notice (draft for comment)", it is proposed that from January 1, 2023 to carry out life insurance and long-term care insurance liability conversion business (hereinafter referred to as conversion business) pilot, the pilot period is tentatively set at two years. Life insurance companies operating ordinary life insurance can participate in the pilot conversion business.

Strengthening long-term care services and security for disabled elderly people is an important work deployment for implementing the national strategy to actively respond to population aging. In order to accelerate the development of commercial long-term care insurance, innovate insurance service models, enrich the supply of insurance products, and meet the people's growing demand for long-term care services and security, the regulatory authorities have decided to carry out pilot business conversion.

It is reported that the conversion business refers to the life insurance company according to the application voluntarily made by the applicant and the insured, the death or expiration payment responsibility in the life insurance policy in the effective state is converted into the nursing payment responsibility through a scientific and reasonable liability conversion method, and the insured is supported to obtain the insurance payment in advance when entering the nursing state due to specific diseases or accidental disability and other reasons.

The methods of liability conversion include policy settlement method and actuarial equivalence method. Among them, the policy discount law is applicable to the insured who has entered the agreed nursing state when applying for the conversion of business; Under this method, the life insurance company will pay the death insurance money to the insured in advance as the nursing insurance money in the way of the death insurance money discount. The actuarial equivalence method is applicable when the insured has not entered the agreed state of nursing at the time of applying for the conversion of business. Under this method, the life insurance company converts part of the policy value of life insurance into the policy value of long-term care insurance as the basis of conversion, and calculates the insured amount of long-term care insurance based on the policy value of long-term care insurance after conversion. After applying for the conversion business, if the insured enters the agreed nursing state, the life insurance company will pay the long-term care insurance amount obtained by the conversion.

China Banking and Insurance Regulatory Commission encourages life insurance companies to increase the use of policy discount method for insurance liability conversion in insurance clauses when developing ordinary life insurance products, so as to expand the responsibility of providing long-term care protection for the insured. Personal insurance companies are encouraged to give full play to their professional advantages, actively explore the provision of care payment methods suitable for home care, community care and institutional care, and meet the differentiated care needs of customers.

Source: Blue Whale Finance