Summary of Key Points
Since last year, the financial industry in Guangdong has taken the lead in addressing the issues of "involution" (such as competitive pricing, aggressive expansion, and high commission rates) within the banking and insurance sectors. By establishing systems, utilizing technology, and cracking down on illegal activities, significant improvements have been made: commission expenses for mortgage and auto loans have decreased by 89%, and the net interest margin has stabilized; more insurance payouts are reaching consumers, costs have been reduced, and auto insurance claims processing times have accelerated. Additionally, challenges in areas such as motorcycle insurance and marine ranching, where insurance was previously difficult to obtain, have been resolved. The industry has shifted from a focus on brute-force resource competition to a more rational approach to improving quality.
Detailed Analysis
1. Banking Industry: Moving from Competition Based on Commission Rates to Compliance
Previously, the banking sector in Guangdong was highly competitive, with banks offering high commissions to intermediaries (e.g., substantial payments for mortgage and auto loan referrals), illegally lowering interest rates, and manipulating deposit and loan volumes at the end of the month to meet targets.
In July last year, Guangdong introduced a "1+3+N" governance framework: a negative list specifying what cannot be done (e.g., lending below industry standards), three self-regulatory documents (conventions, initiatives, commitments), and various specific business guidelines (for mortgages, auto loans, etc.). Advanced technology was also used to monitor three types of problematic behaviors: rapid expansion, unfair interest rate cuts, and excessive commission payments. The authorities collaborated with the police to eliminate illegal lending intermediaries, which were a major driving force behind the involution.
As a result, mortgage and auto loan commissions decreased by 89% in the first half of this year, and banks' net interest margins stabilized and improved. The industry is now more rational in its spending and customer acquisition strategies.
2. Auto Insurance: Reducing Unnecessary Expenses and Increasing Actual Payouts to Policyholders
The auto insurance sector was particularly affected by involution, with insurers offering high handling fees to intermediaries and even inflating costs to appear more competitive (e.g., using funds as commissions, resulting in lower payouts to policyholders).
Guangdong's regulatory authorities reformed the auto insurance premium structure, capped handling fees, implemented a "retrospective monitoring" system to identify companies that exceeded fee limits or made inadequate payouts, and conducted surprise inspections. As a result, the auto insurance payout rate increased by 3.1 percentage points in the first half of the year, meaning more money was actually paid out to policyholders. The overall cost structure improved, and claim processing times were accelerated—average claims processing took 23 days (5 days faster than the national average), with claims under 10,000 yuan being processed in just 10.74 days.
3. Technological Regulation: Using Advanced Tools to Identify and Address Involution
Traditional regulatory methods struggle to capture detailed issues, but Guangdong has adopted digital approaches to fill these gaps:
- Comprehensive data analysis: Each bank and insurance institution is tracked for abnormal business growth patterns (e.g., a sudden surge in auto loan applications).
- Targeted inspections: Direct verification of compliance violations (e.g., whether commissions are secretly paid to intermediaries).
- Foshan分局's additional measures: Establishment of an anomaly information sharing database to monitor four types of risks, such as sudden staff turnover (which may indicate customer switching), unusual intermediary collaborations, concentrated IP address activity (indicating potential fraud), and misleading information from social media (e.g., exaggerated loan offers).
4. Eliminating Disruptive Actors: Cracking Down on Illegal Intermediaries
Illegal lending intermediaries played a role in fueling the involution in the banking sector by persuading customers to use certain banks and demanding high commissions, sometimes even providing false documentation.
Guangdong and the police jointly cracked down on these intermediaries, resolving several significant cases this year and reducing external factors that drove competitive pressure within the industry.
5. Insurance Innovation: Overcoming Barriers to Coverage and Avoiding Low-Price Competition
In certain risk-prone areas, insurers were hesitant to offer coverage (e.g., motorcycle insurance due to high claim rates), or they engaged in low-price bidding to secure business (e.g., marine ranching insurance).
Guangdong promoted a "risk-sharing" approach:
- For motorcycles: A collaborative risk-sharing mechanism was established, allowing multiple companies to jointly underwrite policies, reducing the risk and increasing capacity without relying on competitive pricing.
- For marine ranching and commercial aerospace sectors: Joint underwriting partnerships were formed to share risks and enhance coverage capabilities.
These innovations not only solved the problem of insurability but also prevented harmful price competition.
In summary, Guangdong's efforts to combat involution in the financial industry are not just empty slogans; they involve a comprehensive approach combining systems, technology, and enforcement. This shift has transformed the industry from a focus on resource allocation to a emphasis on service quality and customer satisfaction, ultimately benefiting both consumers (with improved payouts and faster claims processing) and the industry itself (with more sustainable operations).