[Becoming an Insurance Insider] You Cannot Recover Principal Even if Terminated Due to Illegal Insurance Contract

Enforcement of the Financial Consumer Protection Act... Strengthening Consumer Rights
"Service Fees Excluded Even If Cancellation Is Requested"

[Editor's Note] Difficult insurance, a clear explanation of insurance that remains confusing even after listening to explanations. There is no bad insurance in the world, only insurance that does not suit me. Following easy-to-understand insurance explanations, the path to becoming an 'insurance insider' is not far away.

On the morning of the 1st, participants are taking a commemorative photo at the Bank CEO Meeting held at the Bankers' Hall in Jung-gu, Seoul. (From left: Choi Seong-il, Deputy Director of Banking and Small and Micro Finance at the Financial Supervisory Service; Kim Eun-kyung, Director of Financial Consumer Protection at the Financial Supervisory Service; Eun Sung-soo, Chairman of the Financial Services Commission; Yoon Jong-won, President of Industrial Bank of Korea; Heo In, President of Kookmin Bank) / Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Oh Hyung-gil] From now on, consumers who were unfairly persuaded to subscribe to insurance that does not suit them will be able to request cancellation within 5 years of subscription.

This is the right to cancel illegal contracts introduced by the enforcement of the Financial Consumer Protection Act. However, even if the illegal contract cancellation right is exercised, the principal cannot be refunded.

According to the insurance industry on the 18th, as consumer rights are strengthened by the Financial Consumer Protection Act, the right to cancel illegal contracts has been newly introduced.

The right to cancel illegal contracts is the right to request contract cancellation when the sale of financial products violates sales regulations. Specifically, it applies when the suitability principle, appropriateness principle, or explanation obligation is violated, or in cases of unfair business practices or improper solicitation.

If a financial consumer wishes to cancel a contract, they must submit a cancellation request form announced by the Financial Services Commission along with documents proving the violation to the financial product seller. It is pointed out that it is important for consumers to secure recorded materials at the time of contract and keep documents received at subscription.

In particular, the cancellation request must be made within one year from the date the violation of the contract conclusion is known, and the request must be made within 5 years from the contract conclusion date.

However, even if the right to cancel illegal contracts is exercised, the principal is not guaranteed. The right to cancel illegal contracts applies in principle to all financial products with continuous contracts where property disadvantages occur upon cancellation, but the effect of cancellation occurs prospectively, so it becomes invalid from the 'cancellation date' onward. In other words, costs related to services under the contract until cancellation are generally not refunded to the consumer after contract cancellation.

The range of insurance premiums that insurance companies must refund to consumers is the remaining amount after deducting costs related to risk coverage, contract conclusion, and maintenance from the paid premiums up to the cancellation date.