Launch of 'Death Benefit Securitization' Products on October 30
Chairman Lee Okwon of the Financial Services Commission Visits Hanwha Life Customer Center for On-Site Inspection
Task Force to Consider Introduction of Additional Services
"Living a healthier and more active life with the income secured through the securitization of death benefits is also better for your children."
This was the encouraging remark delivered by Lee Okwon, Chairman of the Financial Services Commission, to a customer who applied for the securitization of death benefits at the Hanwha Life City Hall Customer Center in Jung-gu, Seoul on October 30. Chairman Lee visited the center on the launch day of the death benefit securitization product to inspect the preparations and listen to feedback from the field.
The death benefit securitization system allows policyholders to receive up to 90% of their whole life insurance death benefit as a monthly annuity. On this day, major life insurers including Hanwha Life, Samsung Life, Kyobo Life, Shinhan Life, and KB Life simultaneously launched the death benefit securitization rider. By January next year, all life insurance companies are expected to roll out this rider.
Eokwon Lee, Chairman of the Financial Services Commission, visited the Hanwha Life City Hall Customer Center located in Jung-gu, Seoul on the 30th and observed the conversation between a counselor and a customer applying for death insurance claim securitization. Photo by Donghyun Choi
A female customer visiting the customer center said, "When my children were young, I needed the death benefit, but now that they are grown, I need money for myself." She added, "I learned about death benefit securitization through news reports and KakaoTalk notifications and came to apply." A Hanwha Life counselor checked the customer's identity, showed her the customer confirmation form, and explained the details of the application process for death benefit securitization, including the securitization ratio, payment period, and the right to withdraw. Chairman Lee observed this interaction, encouraged the staff, and confirmed how the customer became aware of the death benefit securitization.
Death benefit securitization is available to those aged 55 or older. Holders of fixed-rate whole life insurance policies with death benefits of 900 million won or less can apply regardless of income or assets. The contract and premium payment periods must each be at least 10 years. The policyholder and insured must be the same person, and there must be no outstanding policy loans at the time of application.
Securitization can be tailored to individual circumstances. For consumers who need regular retirement income, the securitization ratio can be set higher and the payment period extended to receive larger amounts. For example, suppose a 40-year-old man has a whole life insurance policy with a death benefit of 100 million won, pays a monthly premium of 255,000 won for 10 years (totaling 30.6 million won), and the assumed interest rate is 7.5%. If he sets the securitization ratio at 90% at age 55 and chooses a 30-year payment period, he can receive 1.68 million won annually for a total of 50.31 million won. Additionally, at the end of the securitization period, he can still receive the remaining 10 million won of the death benefit.
The government plans to operate a death benefit securitization task force to monitor the preparation of service-type and monthly annuity-type products until all life insurers have launched the rider. It also plans to continuously develop and support insurance products that help people prepare for retirement or provide tangible benefits in daily life. In connection with this, the government will actively consider expanding the scope of subsidiaries and ancillary businesses, as well as promoting the use of trusts.
Chairman Lee stated, "Death benefit securitization is a system being implemented for the first time," adding, "Once securitization is carried out, the death benefit cannot be restored, so it is essential to provide consumers with detailed explanations in advance."
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