Misleading Whole Life Insurance Sold as 'Jeochuk Products'... 4 Out of 1000 Cases Are Incomplete Sales

Incomplete Sales Up to 10 Times Higher in Life Insurance Compared to Other Products
Sales Targeting 1020 Age Group Also Increasing... Authorities Strengthen Monitoring

[Asia Economy Reporter Oh Hyung-gil] It has been revealed that out of 1,000 whole life insurance policies sold last year, 4 contracts were canceled due to incomplete sales. Whole life insurance is a flagship product of life insurance companies, but it has a high cancellation rate due to incomplete sales compared to other products, earning a notorious reputation as the "main culprit" of consumer complaints.

In line with the enforcement of the Financial Consumer Protection Act, life insurance companies are strengthening "consumer protection," but there are calls for institutional reinforcement of sales monitoring.

According to the insurance industry on the 24th, 21 life insurance companies that sold whole life insurance last year newly signed a total of 1,569,611 whole life insurance contracts. Among these, 7,011 cases were confirmed as incomplete sales. The average incomplete sales ratio reached 0.45%.

This is at least twice and up to about ten times higher than the incomplete sales ratios of other products sold by life insurance companies during the same period.

Excluding whole life insurance, the incomplete sales ratio was highest for annuity insurance at 0.17%, followed by critical illness (CI) insurance at 0.16%, cancer insurance at 0.07%, savings insurance at 0.06%, and children's insurance at 0.04%.

The life insurance company with the highest incomplete sales ratio was NH Nonghyup Life Insurance. Out of 112,240 new contracts, 1,349 cases (1.2%) were incomplete sales. ABL Life recorded 544 cases (0.98%) out of 55,282, and Chubb Life had 35 cases (0.94%) out of 3,731.

Companies with incomplete sales ratios higher than the average included ▲KDB Life (0.83%) ▲DGB Life (0.73%) ▲Orange Life (0.68%) ▼Shinhan Life (0.57%) ▲AIA Life (0.58%) ▲MetLife (0.53%) ▲Samsung Life (0.5%). Prudential Life, which sold 40,571 whole life insurance policies and had 40 incomplete sales cases (0.1%), recorded the lowest ratio.

Whole life insurance pays benefits to the beneficiaries upon the insured's death and is considered the origin of life insurance. However, it has recently become a major source of consumer complaints. Among the 4,695 complaints related to incomplete insurance sales received in the second half of last year, 3,255 cases (69.3%) were related to whole life insurance.

Most incomplete sales involved misleading consumers by selling whole life insurance as a savings product. As low interest rates persist, those unable to find suitable investment options seek higher investment returns rather than death benefits during the insurance period. Insurance companies allow conversion of death benefits into annuities, and agents motivated by relatively high recruitment commissions contribute to this trend.

In particular, recently, corporate agencies (GA) have increasingly targeted people in their teens and twenties, who have relatively less need for death coverage, to sell whole life insurance.

Recognizing the seriousness, financial authorities have issued two "consumer advisories" on whole life insurance this year. They plan to strengthen monitoring of sales and complaints related to whole life insurance in the second half of the year.

Additionally, under the Financial Consumer Protection Act enforced in March, financial companies violating explanation obligations or prohibitions on unfair sales practices may face punitive fines of up to 50% of related income. Life insurance companies are cautious to avoid being the first case detected after the six-month guidance-focused supervision period ends.

A life insurance company official explained, "Whole life insurance is not suitable for savings purposes because more risk premiums and business expenses are deducted from the premium compared to savings insurance," adding, "We are spreading compliance with explanation obligations especially targeting GAs, which are frequently caught for incomplete sales."

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