Guaranteed Insurance Premiums Decrease by 2-3% and Surrender Refunds Increase

[Asia Economy Reporter Kim Hyo-jin] Going forward, premiums for protection insurance will be 2-3% cheaper, and surrender refunds will increase. Renewal-type and re-enrollment insurance products will see reduced acquisition costs, which will act as a factor in lowering premiums for consumers. The additional payment limit for protection insurance premiums will be reduced to the level of existing paid premiums.

According to financial authorities on the 16th, the Financial Services Commission held a regular meeting the day before and approved a partial amendment to the Insurance Business Supervision Regulations containing these details. Most of the amendments to the supervision regulations will take effect immediately upon approval.

The financial authorities decided to lower the standard surrender deduction amount for the savings portion of protection insurance premiums to increase consumers' surrender refunds and reduce premiums.

The standard surrender deduction amount refers to the statutory upper limit of the amount deducted from the consumer's accumulated funds when an insurance contract is terminated. Lowering this upper limit means that consumers will receive a larger refund upon surrender, ultimately leading to lower premiums.

The financial authorities estimate that the premium reduction effect from lowering the standard surrender deduction amount will reach 2-3%.

Acquisition costs (contract conclusion costs) assigned to renewal-type and re-enrollment insurance products will be reduced. The decrease in acquisition costs will act as a factor in lowering premiums at the time of renewal or re-enrollment.

Renewal-type insurance automatically renews the contract and changes the premium at each renewal cycle (such as 1, 3, or 5 years) unless the consumer explicitly expresses an intention not to renew. Re-enrollment insurance renews the contract only if the consumer expresses an intention to re-enroll at each re-enrollment cycle.

Since the acquisition cost ratio for renewal and re-enrollment contracts is structured to be proportional to the premium, this measure addresses the issue where premiums and acquisition costs increase together when elderly policyholders renew or re-enroll. The financial authorities decided to set the contract conclusion cost at the time of renewal or re-enrollment to about 70% of the initial contract.

The additional payment limit for protection insurance will be reduced from twice the existing paid premium to the same amount as the existing paid premium. The intention is to eliminate the side effect of selling protection insurance as savings insurance by increasing only the accumulated funds without increasing the risk coverage amount.

Products that set acquisition costs exceeding the surrender deduction limit will be required to disclose this obligation to insurance companies to induce their exit from the market.

The financial authorities also decided to change the insurance contract solicitation commission system, which has been identified as a cause of overheated competition in the insurance industry.

By clearly setting the commission payment criteria in advance and restructuring the commission system, which was initially set to pay excessively, to be paid in installments over the insurance contract period, they aim to change the structure where contracts are concluded but no post-management is performed. The solicitation commission reform plan will be implemented in 2021 for face-to-face channels and in 2022 for non-face-to-face channels.

This content was produced with the assistance of AI translation services.