With the booming stock market leading to a surge in sales of variable life insurance products, financial authorities are said to be checking for any incomplete sales through mystery shopping. Variable life insurance is a product where part of the premium is invested in stocks or bonds to generate revenue, and there is a possibility of principal loss depending on investment returns and the duration of the policy.
According to the financial sector on the 21st, the Financial Supervisory Service (FSS) plans to enhance monitoring of the recently surging variable life insurance and will soon check the appropriateness of the sales process through mystery shopping. Mystery shopping is a system where external professionals pose as consumers to evaluate whether financial companies' sales procedures or processes are appropriate while purchasing financial products. The FSS has decided to inspect high-risk products, including collective investment securities, derivative-linked securities, and over-the-counter derivatives, in addition to variable life insurance through mystery shopping.
Variable life insurance is a product that invests part of the premium, excluding insurance benefits and business expenses, in financial products such as stocks or bonds to generate revenue, which is then reflected in future insurance benefits. While it offers the potential for higher revenue compared to regular insurance, there is a risk of losing the principal depending on the investment return. Furthermore, if the policy term is less than 10 years, the early termination refund may not reach the principal.
Due to the recent upward trend in the stock market and expectations for interest rate cuts, sales of variable life insurance are increasing. According to the Life Insurance Association, the number of new contracts for variable life insurance in the first half of this year was 81,138, marking an increase of 28.1% (17,837 contracts) compared to the same period last year (63,301 contracts). During the same period, the initial premium for variable life insurance (the premium paid first after signing up) rose from 839.5 billion won to 1.38 trillion won, a 64.7% increase.
While financial authorities continue to inform the public about the features and risks of variable life insurance through guidelines, related complaints persist. In the first quarter of this year, 370 of the 22 complaints received by life insurance companies were related to variable life insurance.