Samsung, Hanwha, Kyobo, Shinhan Life, and KB Life
All Life Insurers to Launch Second Phase by January 2 Next Year
The Financial Services Commission announced on the 22nd that it will launch a securitized death benefit product on the 30th.
Initially, five life insurance companies-Samsung Life Insurance, Hanwha Life Insurance, Kyobo Life Insurance, Shinhan Life, and KB Life Insurance-will launch the product in the first phase. By January 2 of next year, all other life insurers, except BNP Paribas Cardif Life Insurance and IBK Pension Insurance, are scheduled to release related products in the second phase.
The death benefit securitization system drew attention after President Lee Jaemyung praised it as "an excellent system." The core of the system is that policyholders can maintain their paid-up, fixed-rate whole life insurance policies and receive up to 90% of the death benefit in regular (annual or monthly) payments during their lifetime.
For example, if a policyholder who enrolled at age 30 and paid a total of 20.88 million won (87,000 won per month for 20 years) for a whole life insurance policy with a 100 million won death benefit chooses to securitize 70%, they can receive about 1.64 million won annually on average (a total of 32.74 million won) over 20 years starting at age 55.
Under the same conditions, if payments begin at age 65, the policyholder would receive about 2.18 million won annually on average (a total of 43.7 million won), and at age 75, about 2.68 million won annually on average (a total of 53.58 million won).
The older the policyholder, the larger the reserve accumulation, resulting in higher payouts.
According to the Financial Services Commission, as of the end of last month, there are 414,000 contracts eligible for securitization at the five life insurers participating in the first phase, with a total insured amount of 23.1 trillion won.
The Financial Services Commission plans to individually notify consumers holding contracts eligible for death benefit securitization via text message or KakaoTalk on the 23rd.
For the second phase, consumers will be notified individually one week before the product launch. As a result, the number of eligible contracts is expected to expand to approximately 759,000, totaling 35.4 trillion won.
At the initial stage of the system's implementation, the Financial Services Commission plans to accept applications only at in-person customer centers and branches, considering that the system is designed specifically for those aged 55 and older.
The life insurers have developed a comparison system for death benefit securitization. Before applying, consumers can use a simulation to receive a comparison chart showing payment amounts based on their chosen securitization ratio and period.
The Financial Services Commission intends to continue developing and supporting products and systems that can help people prepare for retirement through insurance products, such as death benefit securitization.
For the 'service-type' death benefit securitization products, the plan is to use them as a test bed to promote the 'servitization of insurance products,' going beyond simply providing the securitized amount in the form of healthcare, nursing, or long-term care services.
Additionally, the Financial Services Commission announced that it will launch tontine and low-surrender-value annuity insurance products early next year. These products increase the annuity amount by offering lower payouts than the accumulated premium if the policyholder dies or surrenders the policy before the annuity begins.
A Financial Services Commission official stated, "The government will continuously monitor the preparation status of service-type products, and if it is determined that institutional improvements are needed, we will actively support them through innovative financial services."
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