Insurance Companies Lift Restrictions on Encouraging Variable Insurance Enrollment for Those Over 80 (Comprehensive)

Revision of Elderly Financial Consumer Protection Guidelines
"Financial Product Choice Must Be Given to the Elderly"

[Asia Economy Reporter Oh Hyung-gil] The insurance industry has relaxed its internal regulations to allow elderly financial consumers to subscribe to variable insurance policies. This move is intended to provide the elderly with more options to access various financial products as society enters an aging era.

However, this has been criticized as going against the trend of strengthening regulations on the sale of financial products to the elderly, following revelations of severe harm to older adults in derivative-linked products (DLF) and private fund scandals.

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 aim to enhance the convenience of financial transactions for elderly consumers and prevent financial losses.

For elderly financial consumers subscribing 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 will be assigned at face-to-face counters, and at least 30% of monitored contracts will be allocated to elderly consumers to prevent incomplete sales.

Besides strengthening protections for the elderly, the revised guidelines also allow sales that were previously restricted. The clause in the existing guidelines advising restraint in recommending variable insurance to consumers aged 80 and above has been removed in the new revision.

A life insurance industry official explained, "While the financial investment sector advises caution for elderly investors regarding high-risk products like derivatives, the currently sold variable insurance products do not carry such high risks. The removal of the restriction reflects an expansion of consumer choice following requests from some elderly consumers who wish to subscribe."

Not only in insurance but across the financial industry, there is a trend toward expanding financial services for economically active elderly individuals as society enters a super-aged stage. However, past financial product-related damages have caused more severe losses to the elderly.

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

In particular, variable insurance requires periodic fund changes and management depending on economic conditions, which has been criticized as unsuitable for elderly consumers lacking financial knowledge.

Variable insurance invests a portion of the premiums paid into securities (stocks, bonds, etc.) and distributes profits to subscribers based on investment performance. Since there is a possibility of principal loss, a suitability assessment is required before subscription. Therefore, insurers explain that vulnerable financial consumers such as investors aged 65 and above and minors may face restrictions on subscribing to variable insurance.

However, the life insurance industry noted that recently, discretionary asset management services where investments are entrusted to experts, as well as AI algorithm-based fund management services, have emerged, making it easier for elderly consumers to manage their investments.

A life insurance company official said, "The revised guidelines do not mean that elderly consumers can immediately subscribe to variable insurance easily. 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.