by Lee Changhwan
Published 24 Apr.2022 09:52(KST)
Updated 24 Apr.2022 13:59(KST)
[Asia Economy Reporter Changhwan Lee] As financial authorities recently announced a review of the premium calculation system in the life insurance industry, there is growing interest in whether life insurance premiums, including whole life insurance, will decrease in the second half of the year.
According to the insurance industry on the 24th, the Financial Supervisory Service (FSS) requested the life insurance industry on the 20th to conduct a self-assessment of the rationality of each company's premium calculation system.
The FSS is known to have judged that, after life insurers raised premiums several times from 2019 to early last year due to low interest rates, and with interest rates rising for a considerable period, there are now factors from the consumer perspective that warrant a reduction in premiums.
The FSS pointed out that although market interest rates have recently risen rapidly, the assumed interest rate, which determines premiums, has not changed, leading to growing dissatisfaction among insurance consumers and the need to review the rationality of life insurers' premium calculation systems.
The assumed interest rate is the interest rate (discount rate) necessary to calculate the monthly premium amount to be charged to pay the promised insurance benefits to the policyholder. Depending on the assumed interest rate, the monthly premium paid by the insured can vary significantly.
This year, the non-life insurance industry not only lowered automobile insurance premiums but also consecutively raised the assumed interest rates for protection-type products, whereas the life insurance industry has shown no movement, which is interpreted as the reason authorities have initiated this review.
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