[Become an Insurance Insider] Stop Thinking About Building a Lump Sum with Whole Life Insurance

Warning for 10s and 20s on Whole Life Insurance Enrollment

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[Asia Economy Reporter Oh Hyungil] Choi Jeongyun (pseudonym, 23), a college student in her 20s, signed up for whole life insurance after being told by an acquaintance insurance planner that it was a savings product with tax exemption benefits and compound interest. She understood it as a financial investment product but later realized that the amount returned at maturity could be less than the principal and that it was a protection product that pays out only if she dies.

Choi said, "I heard that the insured must die to receive the insurance payout, so I am trying to cancel the contract," adding, "It seems wrong to induce people to sign up as if it were a financial investment product."

Cases of deceiving people in their teens and twenties, who are interested in lump-sum savings and financial investment, by selling whole life insurance as a savings insurance product are rapidly increasing. The Financial Supervisory Service (FSS) has issued a consumer alert 'Caution' regarding such whole life insurance.

Although whole life insurance is a protection insurance designed to provide financial support to the family upon the death of the insured, some agents are inducing young adults in their teens and twenties to sign up by explaining it as a savings insurance product, leading to many complaints.

In the second half of last year, a total of 4,695 insurance complaints related to incomplete sales were received by the FSS, with whole life insurance accounting for the largest portion (3,255 cases, 69.3%). Among these, the 10s and 20s age group accounted for 36.9% (1,201 cases), the highest proportion among age groups.

Most complaints from people in their teens and twenties involved signing up after being told whole life insurance was a savings insurance product and requesting refunds of premiums already paid. In some life insurance company complaints, a significant number of people in their teens and twenties were found to have signed up through briefing sales by corporate agencies (GA).

The FSS explained that whole life insurance is not suitable for savings purposes for young adults starting their careers and advised caution. Compared to savings insurance, more risk premiums and business expenses are deducted from the premiums paid.

They also emphasized that consumers should fully listen to and understand the seller's explanation of the product brochure before deciding whether to sign up and carefully check advertising materials related to financial products.

An FSS official said, "We will strengthen monitoring of whole life insurance complaints and increase management of insurance companies with frequent complaints related to incomplete sales," adding, "We will guide insurance companies to strengthen their internal control functions."