Consumer Warning Issued, but Competition Heats Up for Dollar Insurance Launches

As Preference for Safe Assets Rises, Even Small and Medium-Sized Life Insurance Companies Join In

[Asia Economy Reporter Oh Hyung-gil] Dollar insurance products have been launched in a series since the beginning of the year. Despite the financial authorities issuing a 'consumer advisory' just six months ago, the trend shows no sign of slowing down. This is due to increased preference for the dollar as a safe asset amid growing global economic uncertainties. Insurance companies expect consumer interest to continue rising as the ultra-low interest rate environment makes it possible to secure stable assets using the dollar.

According to the insurance industry on the 17th, fierce competition is expected this year as small and medium-sized life insurance companies have recently entered the dollar insurance market, which had been dominated by foreign insurers.

DGB Life Insurance began selling the 'American Dream Dollar Annuity Insurance' from the 16th. It is a single premium annuity product with a subscription limit of over 10,000 dollars, featuring a guaranteed interest rate of 2.7% for 10 years. The product is available for ages 0 to 75, significantly expanding the eligible age range. It is reported that DGB Life Insurance spent a year developing the system for this dollar insurance product.

KDB Life Insurance also recently launched the 'KDB Dollar Savings Insurance,' the first of its kind as a savings insurance product. It is a single premium product with a subscription amount ranging from a minimum of 10,000 dollars to a maximum of 5 million dollars. The accumulated amount is paid upon survival until maturity, and in case of death during the insurance period, 10% of the single premium plus the accumulated amount at the time of death is paid. The product targets customers who need dollars for purposes such as children's study abroad and immigration funds.

A KDB Life Insurance official explained, "We simplified the product structure by focusing only on interest rates and death benefits to increase accessibility," adding, "We expect the dollar insurance market to continue growing and plan to expand our portfolio continuously by launching products such as dollar whole life insurance."

Dollar insurance has so far been dominated by foreign life insurers such as AIA, MetLife, and Prudential. These companies use the dollar as a key currency and have systems to convert Korean won into dollars. Recently, domestic companies have also established systems that use the dollar separately from the won, entering the dollar insurance market.

Some analysts interpret this as a strategy to aggressively boost sales in a situation where there were no eye-catching products at the beginning of the year. As of the third quarter of last year, KDB Life Insurance and DGB Life Insurance, which launched dollar insurance products, recorded earned premiums of 2.1955 trillion won and 634.2 billion won, respectively, down 6% and 22% compared to the same period the previous year.

Although dollar insurance is based on the stability of the dollar as a key currency, there are various risks such as exchange rate fluctuations and U.S. interest rates.

Since the U.S.-China trade dispute last year, the strong dollar has continued, causing the won-dollar exchange rate to fluctuate significantly around 1,200 won. While insurance companies emphasize the advantage of investing in relatively high-yield dollars while providing disability or death coverage, experts advise that investing without understanding the risks may lead to losses.

The Financial Supervisory Service also issued a consumer advisory on foreign currency insurance in July last year and announced plans to inspect incomplete sales. This was based on the judgment that insurance companies were selling insurance without explaining the risks associated with exchange rate fluctuations.

An insurance industry official said, "Since exchange rates continue to fluctuate, there is a possibility of losses if the exchange rate falls at the time of subscribing to dollar insurance," adding, "As the authorities have issued a consumer advisory, measures to prevent incomplete sales should be prepared."

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