Office worker Kim Mo (33) recently looked into savings insurance and signed up for a retirement insurance product. It was a high premium plan, paying about 2 million won a month, but this was due to the insurance agent's recommendation that there was less worry about situations like cancellation. Kim explained his reason for enrolling by saying, "The initial refund rate is higher than other products, so even if I have to use a large amount for things like buying a house, it seems like I would incur less loss."
Sales of retirement insurance have surged recently at insurance company agencies (GAs). Some specific products have seen sales reach billions of won, creating a sensation. As a savings product, retirement insurance allows beneficiaries to receive death benefits if the insured dies during the policy term, and if they survive until maturity, they can receive the accumulated premiums like a savings account.
According to the insurance industry on the 25th, KB Life Insurance's "100-Year Satisfaction Pension Insurance" retirement insurance sold about 7.2 billion won during the two weeks from the 1st to the 14th. Considering that the total sales of retirement insurance during the same period were 7.5 billion won, this accounted for approximately 96%.
This product is being marketed with the promise of stable retirement funds, featuring a fixed interest rate of 2.75%, high refund rates, and increased pension amounts. Depending on the age of enrollment, the refund rate at the 5-year mark reaches 102-104%. Termination of payments before 5 years is also possible. The refund amount or pension does not change based on interest rates, and the product can be designed to meet customer needs.
One insurance agent selling this product noted, "There are many agents in the field who are achieving results with this product," adding, "I knew this product was better than others, but I didn't expect such explosive reactions."
Due to the nature of being a savings product, the majority of the insurance premiums in the early stage become reserves after excluding business costs, resulting in a high initial refund rate. The initial refund rate for retirement insurance is over twice as high as that for short-term premium whole life insurance.
Retirement insurance is not a protection insurance, so it has a structurally disadvantageous position in terms of securing contract margins (CSM) compared to short-term premium whole life insurance. Due to the nature of savings products, the margin rate is low, which results in less CSM reflection, and there is almost no guarantee interest rate margin or risk rate margin, while the business cost margin is also not significant. Nevertheless, the reason for selling is that the premium per case for retirement insurance is 4-5 times higher than that of short-term premium whole life insurance, making it potentially advantageous in terms of per-case CSM.
Another reason for the surge in retirement insurance sales is noted as being a substitute product for expensive short-term premium whole life insurance. Compared to the high premiums of short-term premium whole life insurance, retirement insurance can be enrolled at relatively lower premiums and offers a longer coverage period, enabling stable financial management over the long term. Additionally, it also has the advantage of covering various situations such as living expenses during retirement and long-term care.
As a result, insurance companies are eager to sell similar products. NH NongHyup Life Insurance's "Honest NH Whole Life Insurance" increases the death benefit by 3% every year, reaching a maximum of 160%, and allows policyholders to utilize the accumulated amount as retirement funds through the retirement fund design conversion rider. The feature is that the payment period is divided into two, with higher premiums paid during the first payment period and only 10% of the first payment period's amount being paid during the second.
As sales of retirement insurance have surged in the market, there is a significant possibility that it will become a major means of preparing for retirement in the future. An official from the insurance industry noted, "It seems likely to gain more popularity among consumers pursuing stable revenue."