Insurance companies are being criticized for excluding business expenses when disclosing the revenue of their retirement pension insurance. This is said to be unfavorable to the securities and banking industries. Fund revenue includes the fees received by asset management companies, but insurance companies disclose revenue without factoring in these business expenses, which could mislead investors.
Especially when the stock market fluctuates due to external variables, as seen recently, there can be an optical illusion that the revenue from insurance company pension insurance appears unusually high.
Insurance companies take a fee called 'business expense' in advance from retirement pension subscribers. It has been found that they do not reflect this business expense in the revenue disclosed for their own pension insurance when promoting it or on retirement pension comparison disclosure sites. Sellers in other sectors like securities and banking have expressed that this is unreasonable, and the Financial Supervisory Service has stated it will improve the disclosure methods.
According to the Financial Supervisory Service's integrated pension portal retirement pension comparison disclosure on the 13th, the five-year revenue rate of major domestic guaranteed retirement pension products is similar at about 2 percent for banks, insurance companies, and securities firms. The management fees were also less than 1 percent, showing no significant differences regardless of the type of financial institution. Based on the disclosure alone, the seller does not seem particularly important.
However, there was a hidden trap in the disclosed figures. This is due to the item 'business expense' that only applies to insurance products. Business expenses are the costs required to operate the insurance business. After taking the business expenses in advance from the principal amount contributed by subscribers, the remaining amount is managed as a product. The business expense typically ranges from 10 to 20 percent.
Currently, in the FSS retirement pension disclosure, the amount calculated as the principal contribution excludes business expenses. Applying the disclosed revenue rate here would result in a revenue amount that is lower compared to actual contributions.
Securities firms and banks do not impose business expenses. Although both types of products also incur management and asset management fees, these are items that insurance companies also impose and disclose uniformly. As all retirement pension product revenue rates and fees are disclosed using the same standards, the disclosure documents do not reflect only the business expenses.
Assuming that an insurance company retirement pension has a business expense of 10 percent and a revenue rate of 3 percent, the disclosure may show a revenue rate of 3 percent, but for 4 to 5 years, there may effectively be no revenue. Considering the business expenses, it takes a long time for the principal to be recovered, and there is no way to know this from the disclosure alone.
If someone blindly believes in the comparison disclosure and expects a similar revenue rate to that of securities firms or banks when opting for an insurance company product, it could directly lead to subscriber losses. Of course, since retirement pensions are products that individuals subscribe to for a long time, if the disclosed revenue rate of insurance company products is high, it may yield benefits in the long term. However, if the disclosure site itself does not serve as an accurate information provider, it has been pointed out that improvements must be made urgently.
The Financial Supervisory Service is currently assessing this issue. An official from the Financial Supervisory Service noted, "We have been aware of problems with the current method and are reviewing improvements to the disclosure internally," adding, "We will consult with financial companies to establish disclosure standards that can convey actual revenue rates."