[Becoming an Insurance Insider] Beware of Offshore Insurance with '6% Compound Interest' Returns

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[Asia Economy Reporter Oh Hyungil] "Recently, posts encouraging offshore insurance subscriptions have been easily found on SNS platforms such as Facebook, blogs, and YouTube. Therefore, a consumer alert has been issued as consumers need to be cautious."

Posts encouraging subscriptions to foreign insurance products such as 'offshore insurance' or 'Hong Kong insurance' are spreading rapidly. Recently, financial authorities issued a warning about offshore insurance sold by foreign insurers that have not obtained domestic insurance business licenses.

According to the insurance industry on the 5th, offshore insurance currently being sold secretly is enticing subscribers by promising an annual compound return of 6 to 7%.

The problem is that they do not provide information about the possibility or risk of losses due to excessive profit inflation or exchange rate fluctuations, which could potentially cause consumer damage.

Under current law, contracts with foreign insurers are generally prohibited. Only certain insurance contracts such as life insurance contracts are allowed, but only methods using mail, telephone, or computer communication are permitted, and subscription through agents is prohibited.

In particular, when soliciting subscriptions, it is prohibited to introduce low premiums, high returns, extension of coverage period by changing the insured, exchange gains, or to provide information such as '6 to 7% annual compound dividend insurance' or 'total premiums paid 100 million KRW, total withdrawal amount 4 billion KRW.'

Also, offshore insurance is not covered by domestic depositor protection and is not subject to complaints or dispute mediation by the Financial Supervisory Service. In case of loss or dispute, consumers will not be protected under domestic consumer protection systems.

Accordingly, there are claims within the insurance industry that personal subscriptions to offshore insurance should be restricted.

Researcher Han Sangyong of the Korea Insurance Research Institute said, "In household insurance, not in corporate insurance or reinsurance, the risk of consumer damage is greater than the necessity of offshore insurance," adding, "Countries such as the United States, the European Union (EU), France, the United Kingdom, and Japan generally restrict offshore insurance transactions for household insurance to protect consumers."

He also suggested alternatives such as excluding household insurance from the scope of offshore insurance allowance or mandating government approval before offshore insurance contracts.

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