"Whole Life Insurance Unsuitable for Lump Sum Savings in 20s"…Consumer Alert Issued 'Caution'

Complaints Related to Incomplete Sales of Whole Life Insurance: 36.9% from 10s and 20s Age Groups

[Asia Economy Reporter Park Sun-mi] #. In her 20s, Ms. A joined a whole life insurance policy after an insurance planner explained it as a savings product with tax-exempt benefits and compound interest. The insurance guide materials also described it as 'savings + insurance + pension,' so she understood it as a financial product necessary in the ultra-low interest rate era. However, she later realized that the amount returned at maturity could be less than the principal, and that it was a protection-type product that pays out only upon death.

On the 8th, the Financial Supervisory Service (FSS) issued a consumer alert of "caution," stating that whole life insurance is not suitable for young adults (in their teens and twenties) to accumulate a lump sum, due to a surge in consumer damages.

According to the FSS, a total of 4,695 insurance complaints related to incomplete sales were received in the second half of last year, with whole life insurance accounting for the largest share (3,255 cases, 69.3%). Among these, complaints related to incomplete sales of whole life insurance from people in their teens and twenties accounted for 36.9% (1,201 cases), the highest proportion by age group.

Most complaints from people in their teens and twenties stated that they joined whole life insurance after being told it was a savings insurance product and demanded refunds of premiums already paid. In some life insurance company complaints, it was also found that a significant number of people in their teens and twenties joined through briefings by corporate insurance agencies (GA).

Accordingly, the FSS issued a consumer alert of "caution" due to the surge in consumer damages. The FSS explained, "Although whole life insurance is a protection insurance designed to provide economic support to the insured's survivors upon the insured's death, many complaints indicate that some agents induce young adults in their teens and twenties to join by explaining whole life insurance as a savings insurance rather than protection insurance, hence the consumer alert."

Compared to savings insurance, whole life insurance deducts higher risk insurance premiums (for death and other coverage) and business expenses (such as agent commissions) from the premiums paid, making it unsuitable for savings purposes.

Consumers should fully listen to and understand the seller's explanation of the product description before deciding whether to subscribe to insurance. The Financial Consumer Protection Act, implemented since March, obliges sellers to explain important matters about financial products in a way consumers can understand when recommending contract conclusion or upon consumer request.

Additionally, sellers must provide explanatory documents to consumers and confirm that consumers have understood the explanation through signatures, seals, or recordings. Consumers should carefully verify advertising materials related to financial products, including which company’s product is being sold and the seller involved.

An FSS official stated, "We will strengthen monitoring of complaints related to whole life insurance and tighten management of insurance companies with frequent incomplete sales complaints," adding, "we will also guide insurance companies to strengthen their internal control functions."

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