Insurance Companies Do Not Offer Premium Discounts Even if Sports Teams Win Championships

Financial Services Commission "Providing Special Benefits"
Criticism of Fairness Issues Among Customers
"Excessive Regulation Compared to Banks"

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] 'If a professional volleyball team operated by an insurance company run by a bank wins the league, can they sell insurance with a 10% premium discount?'

An insurance company's attempt to launch a new insurance product from a marketing perspective failed to overcome regulatory barriers. Compared to banks that actively engage in sports marketing by sponsoring sports teams and utilizing preferential interest rates, there are criticisms that the regulations are excessive.

According to the insurance industry on the 7th, the Financial Services Commission recently issued a legal interpretation regarding a query from A Life Insurance about providing preferential interest rates and premium discounts.

A Life Insurance inquired whether offering premium discounts only to policyholders who subscribe during a specific period constitutes unfair discrimination among policyholders under the Insurance Business Act, and whether selling savings insurance that applies preferential interest rates or premium discounts based on the performance of the insurer’s own sports team constitutes providing special benefits.

Many insurance companies operate professional basketball and volleyball teams, and this idea originated from the intention to offer benefits to customers based on team performance.

The Financial Services Commission stated, "Selling savings insurance that applies preferential interest rates or premium discounts only to policyholders who subscribe during a specific period or based on the performance of the insurer’s sports team is highly likely to constitute providing special benefits," and interpreted that such sales are not allowed.

Insurance pays out benefits when the insured event agreed upon between policyholders occurs, and premiums are set based on the likelihood of such events. However, providing preferential interest rates or premium discounts based on sports team performance, which is unrelated to the risk of insured events, is considered providing special benefits.

Article 98 of the Insurance Business Act (Prohibition of Providing Special Benefits) prohibits persons engaged in concluding or soliciting insurance contracts from providing or promising to provide special benefits related to such conclusion or solicitation.

The Financial Services Commission explained, "This is to prevent excessive competition, disruption of solicitation order, deterioration of financial soundness, and unfairness among customers," adding, "Providing preferential interest rates or premium discounts to policyholders who subscribe during the sports season also raises concerns about disruption of solicitation order and unfairness among customers."

However, there are criticisms that this judgment is an excessive regulation compared to other financial sectors. Since 2019, Shinhan Bank has been selling 'Professional Baseball Savings and Deposit' products as a sponsor of professional baseball. These products offer preferential interest rates depending on the performance of the team chosen by the subscriber, and if the team wins the Korean Series, a preferential interest rate of 1.0 percentage point per annum was given. The product attracted over 1 trillion won in deposits and gained popularity.

Shinhan Bank is also conducting a pre-reservation event for professional baseball savings this year. Busan Bank sold Lotte Giants fixed deposits, while Gyeongnam Bank and Gwangju Bank sold deposit products wishing for the victories of NC Dinos and KIA Tigers, respectively.

An insurance industry official said, "Insurance products must be conservative as they guarantee customer risks," but added, "It is regrettable that financial authorities apply particularly strict standards to new marketing efforts by insurance companies."

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