Variable insurance is a 'principal loss' possible product... "Be cautious when subscribing"

Related Complaints Persist... Consumer Precautions Announced

#Mr. Kim was told by an insurance planner that if he paid premiums for only 5 years, the principal would be guaranteed, so he maintained a 'variable annuity insurance' policy for over 5 years. When he needed a lump sum, he inquired with the insurance company. The response he received was that he could only receive an amount less than the principal, which was the total premiums paid. Although he filed a complaint with the Financial Supervisory Service (FSS), it was not accepted because the product brochure clearly stated the possibility of principal loss and that it could take a long time to reach a 100% refund rate, and there was a handwritten signature and a happy call confirmation indicating that he had heard and understood this explanation.

Considering that complaints about variable insurance remain frequent, the Financial Supervisory Service urged consumers to be cautious when subscribing to variable insurance. Above all, it emphasized that consumers must be aware that it is an investment product where principal loss is possible.

On the 23rd, the FSS announced these consumer precautions. According to the FSS, 898 complaints related to variable insurance were recorded in the first half of this year. Although the number decreased compared to the same period last year, the proportion of variable insurance complaints among all life insurance complaints remained at 15%.

In particular, the FSS advised caution regarding the possibility of 'principal loss' in variable insurance. Variable insurance is a performance-based product where the portion of the premiums paid by the policyholder, after deducting risk premiums and administrative fees, is invested in funds suitable for the policyholder's investment preferences, and profits or losses are distributed accordingly. All investment results are the responsibility of the policyholder, and the insurance benefits or surrender values vary depending on the investment outcome. Since the amount invested is after deducting risk premiums and administrative fees, the insurance benefits or surrender values may be less than the total premiums paid.

Therefore, it is necessary to be careful not to have the 'suitability assessment,' which is essential when subscribing to variable insurance, conducted by a proxy or filled out as instructed by the insurance planner. Also, after the suitability assessment, the policyholder must confirm the assessment results from the insurance company.

Additionally, variable insurance is divided into variable whole life insurance, which is a protection-type insurance, and variable annuity insurance, which is a savings-type insurance. Among these, variable whole life insurance primarily guarantees death benefits, so it differs from bank deposits or savings. It is not suitable for savings purposes.

Variable universal insurance also requires caution. It is a product that includes universal features such as adjusting premium payments (flexible payment) and withdrawing within the surrender value range (partial withdrawal) after the mandatory premium payment period. An FSS official stated, "If the universal features are continuously used, the time to reach the principal in variable insurance may change, and the surrender value may decrease, leading to early termination of the insurance contract or a reduction in the coverage period." He added, "To receive the same coverage as the initial contract after using the universal features, you may need to pay more than the amount withdrawn or the premiums missed due to flexible payments."

Furthermore, the FSS emphasized that variable insurance must be continuously managed considering economic fluctuations and market conditions. An FSS official explained, "Policyholders can change funds if necessary, but there are limits on the number of changes. While additional payment systems with lower administrative fees than basic premiums can improve returns, some products do not operate this system, so specific details must be checked."