Affordable Insurance Without Surrender Value... Disappearing from October

[Asia Economy Reporter Oh Hyung-gil] From October, it is expected to become practically difficult to sell no-surrender-value insurance, which offers lower premiums but does not provide a refund if the policy is canceled midway through the subscription period.

No-surrender-value insurance has premiums 20-30% cheaper than regular insurance but provides the same coverage, making it a popular choice mainly among the working class.

According to financial authorities and the insurance industry on the 30th, the Insurance Business Supervision Regulations, which require the surrender value of no- and low-surrender-value insurance to be adjusted to the same level as regular insurance, have entered the legislative notice stage. After review by the Ministry of Government Legislation, it is scheduled to be implemented in October. Since the Financial Services Commission announced measures to revitalize no-surrender-value insurance products, sales began at the end of 2015, and over 2 million policies were sold last year.

However, financial authorities have taken action as no- and low-surrender-value insurance, which sold well due to low premiums, became embroiled in controversy over incomplete sales.

Financial authorities viewed this product as a protection-type insurance covering death, cancer, illness, injury, etc., but in actual sales, the surrender value was overly emphasized, causing it to be sold like a savings product such as time deposits.

Once the revised supervision regulations are enforced, the surrender value of no- and low-surrender-value insurance must be designed to be equal to or lower than that of standard insurance. If the surrender values become equal, the refund amount that subscribers receive later will decrease. From the subscriber’s perspective, the incentive to choose no-surrender-value insurance diminishes. This is why insurance companies unanimously say that no-surrender-value insurance will effectively disappear.

An insurance industry official said, "Consumers’ choice to pay low premiums while maintaining the policy as long as possible to receive refunds will disappear," adding, "If an insurer sells no-surrender-value products, they will inevitably view the government’s policy as excessive regulation."

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