'Short-Term Payment Whole Life Insurance' Refund Rate Scheduled to Decrease, Another Scarcity Marketing Campaign

Financial Supervisory Service to Distribute Short-Term Whole Life Insurance Guidelines
Refund Rates Expected to Drop to Around 110% This Month
Sales Sites Engage in Last-Minute Clearance Marketing

Insurance companies are engaged in a subtle competition over lowering the refund rate of short-term payment whole life insurance to the 110% range. In the field, aggressive clearance marketing is underway with the belief that the refund rate of 120% will not return. This trend is expected to continue until the Financial Supervisory Service (FSS) issues an official guideline regarding short-term payment whole life insurance.

According to the insurance industry on the 12th, most life insurance companies such as Samsung Life, Hanwha Life, Kyobo Life, and Shinhan Life are currently selling short-term payment whole life insurance with a refund rate exceeding 120% based on a 7-year payment and 10-year point. Until last week, there were rumors that many products with a 120% refund rate would end as early as the previous day, but no insurance company has proactively lowered the refund rate so far. Insurance companies and agents affiliated with corporate insurance agencies (GA) who were preparing to end sales of products with a 120% refund rate have no specific instructions and plan to continue sales for the time being.

The rumor that short-term payment whole life insurance with a 120% refund rate would disappear one after another this week arose when the FSS delivered a draft guideline (supervisory administrative operation plan) related to the sale of short-term payment whole life insurance to each life insurance company through the Life Insurance Association at the end of last month. The FSS collected opinions from life insurance companies on the draft by the 4th. The purpose was to understand the industry's situation in advance before distributing the official guideline.

The draft mainly stated that life insurance companies should faithfully consider the possibility of profitability deterioration due to changes in lapse rates when determining the refund rate of short-term payment whole life insurance. Based on the rough guidelines suggested in the draft, the insurance industry conservatively calculated the refund rate and generally found it did not exceed 120%. Accordingly, the industry interpreted this as the FSS effectively pressuring them to lower the refund rate below 120%.

Additionally, the draft stipulated that if the official guideline is implemented, existing products must be revised within 5 business days. Therefore, insurance companies expected that the refund rate would sequentially drop to the 110% range starting as early as the 11th, depending on the timing of the official guideline distribution after the FSS collected opinions on the draft on the 4th. However, as the guideline has not been issued as of this day, most insurance companies continue to sell products with a refund rate above 120% as before.

The FSS is currently weighing the timing of distributing the official guideline, considering the industry's circumstances. An FSS official said, "Some insurance companies find it difficult to switch to new products within 5 business days, so we are considering various factors," adding, "The timing of the official guideline distribution has not been finalized yet." The official also stated, "The life insurance industry interprets that the FSS pressured them to lower the refund rate below 120%, but we have never mentioned a specific figure," and added, "This issue cannot be resolved by the refund rate alone."

Many life insurance companies intend to continue selling short-term payment whole life insurance with a refund rate in the 120% range until the FSS distributes the official guideline. They argue there is no need to proactively lower the refund rate and lose competitiveness. However, some large companies, watching the financial authorities closely, are considering lowering the refund rate to the 110% range within a few days. A representative of a major life insurance company said, "Since a new experience life table will be introduced from April anyway, product revisions are inevitable, so we are considering lowering the refund rate in advance as a gesture of cooperation with the authorities," adding, "Most people who would subscribe to short-term payment whole life insurance have already done so, so demand is not as large as before."