[Becoming an Insurance Insider] Misunderstandings About Savings Insurance... Surge in Complaints About 'Universal Insurance'

[Asia Economy Reporter Oh Hyung-gil] Among whole life insurance policies sold this year, half were universal insurance policies that allow mid-term withdrawals or additional payments.

According to the insurance industry on the 19th, based on three major life insurance companies, the proportion of whole life insurance with universal features added is about 48%. Of the approximately 1.03 million whole life insurance policies sold up to October this year, with initial premiums totaling 287.6 billion KRW, about half are universal insurance policies.

There are concerns that during the sales process, only the advantages of universal insurance are emphasized, leading to it being sold like a bank’s deposit and withdrawal account or causing guaranteed insurance (whole life) to be mistaken for savings insurance.

Most complaints about universal insurance come from policyholders who claim that agents highlighted only the advantages of universal insurance, such as relatively high interest rates (guaranteed interest rate) and mid-term withdrawal features, misleading them to believe it was like a bank’s demand deposit product.

Universal insurance is a product with added functions such as mid-term withdrawal, premium payment deferral, and additional payments to whole life or pension insurance. From the point when the mandatory premium payment period has passed, the amount and timing of premium payments can be adjusted.

However, universal insurance differs from a bank’s demand deposit product in that mid-term withdrawals can reduce the coverage amount or insurance period.

If premium payment deferral continues, the contract may be terminated. In cases where the policyholder uses premium payment deferral to substitute monthly premiums from the reserve fund due to a lack of living expenses and the contract is terminated, a large lump sum payment is required for reinstatement, or reinstatement may not be possible.

Also, additional payments usually do not incur contract establishment fees and are relatively lower than basic premiums, but there is a possibility of contract management costs (collection fees, maintenance fees, etc.) being incurred.

Even in cases where premium payment exemption reasons are stipulated in the policy, previously substituted premiums must be paid to receive benefits without disadvantages.

For example, although premiums do not need to be paid during the subsequent payment period due to a diagnosis of cancer or other reasons stipulated in the policy, consumer complaints may arise regarding demands for additional payments of substituted (deferred) premiums during that period.

Complaints related to universal insurance received by the Financial Supervisory Service up to the third quarter of this year increased by about 11% compared to the same period last year.

In response, financial authorities stated, "Universal insurance has advantages in premium payment and contract maintenance, but due to insufficient accurate guidance on the functions and key details of universal insurance during some sales processes, consumers need to exercise special caution," and added, "We plan to strengthen supervision of insurance companies and products with frequent complaints."

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