Individual Notifications for Eligible Policyholders as Directed by President Lee
Samsung, Hanwha, Kyobo, Shinhan, and KB Life to Launch in October
Service-Type Products to Follow Pension-Type, in Line with Lee Administration’s Policy
Custom
Starting in October, it will be possible to receive whole life insurance death benefits in advance, in the form of an annuity, beginning at age 55.
President Lee Jae Myung is speaking at the Eulji State Council meeting held on the 18th at the Yongsan Presidential Office Building in Seoul. Photo by Yonhap News
The Financial Services Commission announced on the morning of the 19th that it held a meeting on the securitization of death benefits, presided over by Insurance Division Director Lee Dongyeop, and formed a task force (TF) with five life insurance companies to launch related products in October. The five life insurers are Hanwha Life, Samsung Life, Kyobo Life, Shinhan Life, and KB Life.
On this day, the authorities and the industry expanded the eligibility for death benefit securitization from those aged 65 and older to those aged 55 and older. Anyone can enroll regardless of income or asset requirements. As a result, as of the end of December last year, the number of eligible contracts for death benefit securitization increased to 759,000, and the total insured amount rose to 35.4 trillion won, representing approximately 2.2 times and 3 times the previous figures, respectively.
Additionally, a new "annual payment type" will be introduced, which pays out 12 months’ worth of annuity at once. The "annual payment type" will be launched first in October, and the "monthly payment type" will be introduced sequentially after the completion of IT system development early next year. The securitization period can be set in yearly units (minimum of two years). When a customer applies for securitization, the insurer will provide a comparison table of payout amounts based on the securitization ratio and period after running a simulation.
Following the directive of President Lee Jae Myung, the authorities and the industry have decided to provide "individual notifications" to eligible contract holders. According to the minutes of the 27th State Council meeting released by the Ministry of the Interior and Safety on the 8th, President Lee stated, "It seems that many people are not familiar with the system," and added, "As life expectancy increases and the issue of elderly poverty becomes more serious, why not notify each subscriber individually?"
The Financial Services Commission explained that it will notify eligible contract holders for products launched in October via mobile text message or KakaoTalk. Afterward, all insurers launching such products will regularly identify and notify new eligible contract holders for death benefit securitization.
To prevent misselling, applications will only be accepted at in-person branches during the initial phase of the system. Once the system stabilizes, applications will be expanded to non-face-to-face channels. Each insurer will designate a dedicated guide for this purpose. The right to withdraw and the right to cancel death benefit securitization will also be guaranteed. The right to withdraw allows policyholders to cancel their enrollment within the earlier of 15 days from the date of receipt or 30 days from the application date. The right to cancel allows policyholders to cancel their enrollment within three months if the insurer fails to explain important details.
Subscribers can choose to receive benefits as an annuity in advance or enroll in a service-type product. If they opt for an annuity, they can receive up to 90% of the death benefit. When receiving it as an annuity, they can receive 100% to 200% of the monthly premium paid each month. However, lump-sum payments are not permitted.
The payout amount varies depending on the contract’s assumed interest rate and the timing of securitization. The older the policyholder, the greater the benefit, as more reserves have been accumulated.
For example, if a consumer enrolled in whole life insurance at age 30, chose "20-year 70% securitization," and paid a monthly premium of 87,000 won for 20 years (totaling 20.88 million won) for a contract with a death benefit of 100 million won, they would receive 140,000 won per month, totaling 32.74 million won, if they start receiving payments at age 55. If they start at age 65, they would receive 180,000 won per month, totaling 43.7 million won; at age 70, 200,000 won per month, totaling 48.87 million won; and at age 75, 220,000 won per month, totaling 53.58 million won.
If the service-type option is chosen, subscribers can enroll in a variety of products linked to nursing facilities, caregiving, and health management (healthcare) services. The activation of service-type insurance products is also a key policy task for the Lee Jae Myung administration. However, as service-type products require insurers to partner with service providers and develop IT systems, they will be introduced after the initial launch of annuity-type products.
Consumers will be able to enroll in products according to the services they need, such as integrated service-type, nursing facility-specialized, or health management-specialized products. The nursing facility-specialized product allows the insurer to pay the securitized amount directly to a partner nursing facility to cover part of the admission cost. The health management-specialized product provides major disease services such as for cancer, cerebral hemorrhage, and myocardial infarction. A dedicated nurse will be assigned to assist with medication counseling, dietary consultations, and hospital admission procedures, among other services.
An official from the Financial Services Commission stated, "Financial authorities will regularly hold death benefit securitization task force meetings to continuously monitor the overall preparation for product launches and will encourage other insurers (beyond the five life insurers) to launch products as soon as possible."
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