[1mm Financial Talk] Hanwha Life Begins Online Sales of Win-Win Financial Products

Concerns Over Negative Margins Dampen Offline Sales Promotion
Doubtful If Online Sales Will Attract Youth Interest
No Difference in Returns Compared to Existing Savings and Deposits...No Tax Benefits Either

Hanwha Life Insurance, the first in the insurance industry to launch a win-win finance product, will start selling it online just one month after its release. The product offers a fixed interest rate in the 5% range and guarantees the principal even in case of early termination, making it a product with low profitability from the insurer's perspective, and even raising concerns about negative margins. While it could become more popular, there are also voices suggesting that its popularity may wane since its returns are lower than those of savings and deposit products offered by commercial banks.

On the 18th, Hanwha Life began selling the insurance industry's first win-win finance product, the '2030 Lump Sum Savings Stepping Stone Insurance,' through its online direct insurance channel. It has been two months since the product was first unveiled and one month since its launch. Until now, it was only available offline through insurance planners. Hanwha Life stated, "It took about a month to prepare for online sales," and added, "We cannot disclose exact sales figures."

This product is a 5-year maturity savings insurance launched last month, targeted at individuals aged 19 to 39 with a total annual salary of 70 million KRW or less and comprehensive income of 60 million KRW or less. It offers a guaranteed base interest rate of 5% over five years, with monthly payments ranging from 100,000 to 500,000 KRW. A bonus is paid as a certain percentage of the paid amount upon marriage or childbirth during the subscription period. Even if the policyholder terminates the contract early after one month of subscription, the principal is guaranteed (refund rate of 100% or more).

High-interest savings insurance products typically raise concerns about a 'second negative margin' after maturity during periods of high interest rates. Nevertheless, life insurers launched such products last year as a reluctant measure to strengthen their capital base. Since this product also offers a fixed interest rate in the 5% range, and with the prevailing view that interest rates have peaked recently, there is a high possibility of negative margins occurring in the future. Furthermore, since the principal is guaranteed even in case of early termination, the product is seen as one that can easily cause losses for insurers.

For this reason, it is reported that there is little encouragement for sales. It is also said that actual sales volume at branch offices is not high. The industry estimates that about 3 to 4 contracts are sold per day. This contrasts sharply with the Youth Leap Account, which attracted over 160,000 subscribers within two days of its launch in June. A representative from a life insurance company explained, "There is no reason to urge planners at branches to actively sell win-win finance products, which offer almost no kind of commission or incentive called 'policy' to planners," adding, "If online sales had started simultaneously with the product launch, many more people would have been attracted than now, but there are likely various reasons why offline sales were deliberately prioritized first."

There are also criticisms that the product itself lacks appeal to the 2030 generation. While Hanwha Life has made a 'bold' decision, it is difficult to attract young people who have little interest in savings insurance, especially when similar interest rate savings and deposit products are available. If the maximum monthly payment of 750,000 KRW is paid for five years, the total premium paid will be 45 million KRW, and the refund amount will be 50,614,914 KRW, resulting in a yield of 12.5%. This is not significantly different from the 12% yield of simply depositing 10 million KRW in a 4% annual fixed deposit for three years. Moreover, tax exemption benefits do not apply. Although there is insurance coverage such as 10 million KRW in case of death, it is not considered a strong incentive. An industry insider said, "Ultimately, win-win products that provide real benefits should come from cases where almost all citizens subscribe, such as automobile insurance or actual medical expense insurance," adding, "The ongoing political pressure to reduce insurance premiums is in a similar context."