Foreign Currency Insurance Subject to Regulations Similar to Investment Products... Promoting Sales Focused on Actual Demand

Strengthening Risk Management of Foreign Currency Insurance Including Incomplete Sales and Foreign Currency Liquidity

[Asia Economy Reporter Kwangho Lee] Financial authorities are strengthening regulations on foreign currency insurance to enhance consumer protection. They will apply regulations equivalent to those for investment-type products such as variable insurance and improve the sales system so that only consumers who truly need it can subscribe.

The Financial Services Commission and the Financial Supervisory Service announced on the 22nd that foreign currency insurance, which carries the risk of loss, will be subject to the principles of suitability and appropriateness.

The suitability principle prohibits recommending contracts for financial products that are unsuitable based on the consumer's financial situation and experience in acquiring or disposing of financial products. The appropriateness principle requires notification and confirmation if the financial product that the consumer voluntarily intends to purchase is deemed inappropriate considering the consumer's financial status.

To encourage sales focused on actual demand, financial authorities plan to thoroughly verify the actual demand during the suitability investigation. They also plan to clearly explain the premium, insurance benefits, and surrender value in numerical terms when exchange rates fluctuate so that consumers can clearly recognize exchange rate risk. Furthermore, inspections on incomplete sales of foreign currency insurance will be strengthened, and strict sanctions will be imposed if incomplete sales are detected.

In particular, before selling foreign currency insurance, under the responsibility of the CEO, the possibility of incomplete sales will be thoroughly checked and preventive measures prepared. To prevent damages such as unnecessary insurance subscriptions, important information including loss risks will be provided to a designated person when elderly individuals subscribe to foreign currency insurance.

For foreign currency whole life insurance, which has a long exposure period to exchange rate risk, the recruitment commission limit will be reasonably adjusted to prevent incomplete sales caused by excessive marketing and to allow subscriptions based on actual demand. Accordingly, the Financial Supervisory Service expects that the recruitment commission for foreign currency whole life insurance will decrease, resulting in lower premiums.

A financial authority official said, "We will first promote matters that can be promptly addressed, such as preparing model guidelines, and complete the necessary amendments to laws and regulations by the first half of next year. Strengthening sales procedures and enhancing sales responsibility will also be promptly promoted through model guidelines even before legal amendments."

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