Starting Tomorrow, Whole Life Insurance Premiums Increase Up to 10%... 'Relay' Scheduled Interest Rate Reduction

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[Asia Economy Reporter Oh Hyung-gil] Starting tomorrow, insurance premiums for some protection-type insurance policies, including whole life insurance, will increase.

As ultra-low interest rates persist and insurers' investment asset yields decline, it is expected that the assumed interest rates will be lowered, which will act as a factor driving premium increases.

According to the insurance industry on the 31st, starting next month, large life insurers and non-life insurers, beginning with Samsung Life Insurance, plan to lower their assumed interest rates.

The assumed interest rate refers to the expected rate of return that an insurer can earn through investment from the premiums received from customers until the insurance benefits are paid.

When designing products, insurers set the assumed interest rate to calculate the premiums customers must pay; if the assumed interest rate rises, premiums become cheaper, and if it falls, premiums increase.

Typically, if insurers lower the assumed interest rate by 0.25 percentage points, it is estimated that consumers' premiums will increase by 5 to 10%.

Samsung Life Insurance announced in a conference call last month that it would reduce the assumed interest rate for whole life insurance products by 0.25 percentage points. Samsung Life explained, "We plan to uniformly lower the assumed interest rate of our main whole life insurance products starting April 1." The reduction is 0.25 percentage points.

Other life insurers such as Hanwha Life and Kyobo Life also plan to lower their assumed interest rates from around 2.75?3% to about 2.5?2.75%.

Non-life insurers are also expected to lower their assumed interest rates to similar levels as life insurers, so an overall increase in premiums across the industry is anticipated.

Hyundai Marine & Fire Insurance plans to raise premiums for the standard Perfect Comprehensive Insurance by about 5% or more, the no-surrender Perfect Comprehensive Insurance by about 10% or more, and the children's insurance (no surrender) by about 15%. DB Insurance also expects premiums for comprehensive insurance products to increase by 5?8% and children's insurance premiums to rise by 10?12% due to the reduction in assumed interest rates.

However, since the financial authorities have extended the application period for insurance product revisions until June due to the COVID-19 pandemic, some insurers are expected to postpone premium increases accordingly.

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