Serious Financial Damage Among the Elderly... What About Allowing Variable Insurance for Those Over 80?

Insurance Industry Elderly Financial Consumer Protection Guidelines
"Elderly Should Also Be Given Financial Product Choices"

[Asia Economy Reporter Oh Hyung-gil] The insurance industry has relaxed its own regulations to allow elderly financial consumers to subscribe to variable insurance policies. The intention is to provide the elderly with the option to subscribe to various financial products as society enters an aging era.

However, this move has been criticized for going against the trend of strengthening sales regulations for financial products aimed at the elderly, following revelations of severe damage to the elderly in derivative-linked products (DLF) and private equity fund incidents.

According to the insurance industry on the 2nd, the Life Insurance Association's Regulatory Review Committee recently revised the Elderly Financial Consumer Protection Guidelines. The revisions include measures to enhance the convenience of financial transactions for elderly consumers and to prevent financial losses.

When elderly financial consumers subscribe to insurance products via telemarketing (TM), the withdrawal period has been extended up to 45 days. Additionally, a service notifying designated persons such as family members about the contract has been introduced. To better serve the elderly, dedicated staff for elderly customer service will be assigned at face-to-face counters, and more than 30% of monitored contracts will be allocated to elderly financial consumer contracts to prevent incomplete sales.

Besides strengthening protections for the elderly, the revised guidelines also include provisions allowing sales. The previous guideline's clause advising restraint in recommending variable insurance to consumers aged 80 and above has been removed in the new revision.

An official from the life insurance industry explained, "In the financial investment sector, elderly investors are cautioned against high-risk products like derivatives, but the variable insurance currently sold does not carry that level of risk. The regulation was removed to expand consumer choice following requests from some elderly consumers who have demand for subscription."

Not only in insurance but across the financial industry, there is a trend to expand financial services for the elderly with economic power as society enters a super-aged era. However, past financial product-related damages have caused more severe losses to the elderly.

[Image source=Yonhap News]

According to the Financial Supervisory Service, among the 240.4 billion KRW invested by individuals in 46 funds managed by Optimus Asset Management, 69.7 billion KRW (29.0%) was invested by seniors aged 70 and above, the highest among all age groups. Additionally, during the 2019 DLF incident, more than 4 out of 10 investors were revealed to be elderly aged 65 and above.

In particular, variable insurance requires periodic fund changes and management depending on economic conditions, which has led to criticism that it is not suitable for elderly consumers who lack financial knowledge.

However, the life insurance industry stated that recently, discretionary asset management?where investment is entrusted to experts?is available for those who find managing variable insurance difficult, and AI algorithm-based fund management services have also emerged, making it easier for the elderly to manage their investments.

A life insurance company official said, "With this guideline revision, elderly consumers will not be able to easily subscribe to variable insurance immediately. Insurance companies also operate separate variable insurance solicitation rules internally, strictly regulating subscription procedures for those aged 65 and above."

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