Rapid Increase in Insurance Remodeling Sales on TV and YouTube
Damage Occurs Due to Lack of Sufficient Explanation on Principal Losses
[Asia Economy Reporter Oh Hyung-gil] "A new product has been launched with premiums 20% lower than existing insurance and higher refund rates. Switch from expensive whole life insurance to cost-effective whole life insurance."
Recently, as insurance remodeling sales have increased through broadcasts and YouTube, the Financial Supervisory Service has issued a consumer advisory warning regarding switching whole life insurance. It was found that cancellations are being induced without sufficient explanations about the possibility of principal loss upon early termination or comparisons with new contracts.
On the 21st, the Financial Supervisory Service announced that although insurance remodeling sales, which restructure insurance contracts to fit the policyholder's financial status or life cycle, are increasing, insufficient explanations are causing consumer damage, and issued a consumer alert 'Caution.'
Insurance remodeling refers to advertising or consulting that encourages canceling existing contracts and subscribing to new insurance by promoting financial planning or analysis of existing insurance, also called 'insurance switching,' 'insurance redesign,' or 'seunghwan.'
In particular, remodeling whole life insurance into another whole life insurance results in the same coverage but causes financial losses such as overlapping business expenses, making it likely an irrational decision.
In an actual case, a whole life insurance with a death benefit of 40 million KRW was canceled and a new whole life insurance with a death benefit of 50 million KRW was purchased, requiring an additional premium payment of 13 million KRW. If you want to increase the death benefit, you should not cancel the existing whole life insurance contract but add a new whole life insurance policy.
Also, in a case where a whole life insurance with a death benefit of 65 million KRW was canceled due to difficulty paying premiums and a new whole life insurance with a death benefit of 30 million KRW was purchased, overlapping business expenses were incurred. If premium payment is difficult, do not cancel the existing insurance contract but use the reduced paid-up insurance system.
The Financial Supervisory Service recommends that consumers check whether ▲the total premium increases during insurance remodeling ▲there are any disease riders that may lead to rejection ▲the assumed interest rate does not decrease.
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