The Financial Supervisory Service decided to closely examine false and exaggerated advertising in future inspections to prevent the misselling of insurance products. It also considered that excessive advertising spending could increase business expenses and lead to premium hikes.
According to the financial authorities on the 12th, the Financial Supervisory Service (FSS) decided to intensively manage and supervise advertising practices in regular and ad hoc inspections of insurers that stoke consumer anxiety to induce sign-ups. For example, some ads explain that mortality is high when certain diseases or accidents occur and then recommend that consumers need to purchase insurance.
The Financial Supervisory Service (FSS) held an internal control workshop for insurers in Nov. last year and said it would impose strict sanctions under a zero-tolerance principle on false and exaggerated advertising that misleads consumers. In Feb. last year, after reviewing 1,320 online insurance product ads, it removed inappropriate ads that used exaggerated expressions. Some insurers advertised as if policyholders could receive benefits without limits, using phrases like "annual compensation" and "unlimited coverage," while others emphasized only large-benefit specific accidents, leading to the mistaken impression that overall coverage was large.
The Financial Supervisory Service (FSS) is working to improve insurers' misselling practices. According to the FSS, the 25th-month persistency rate of life and non-life insurers last year was 69.2%, staying in the 60% range for the fourth consecutive year. This means about 7 out of 10 people lapse their policies within two years. This is 20 percentage points lower than overseas, such as Singapore (96.5%), Japan (90.9%), and Taiwan (90%).
The Financial Supervisory Service (FSS) believes advertising competition among insurers can lead to higher business expenses and ultimately push up premiums. Business expenses are the costs that insurers expend to solicit, maintain, and manage insurance contracts. Advertising, administrative, and labor expenses are included.
According to the Life Insurance Association and the General Insurance Association of Korea, as of Oct. last year, the net expense ratio of life insurers was 21.3%, up 0.8 percentage points from a year earlier. Over the same period, the net expense ratio of non-life insurers also rose to 25.7%, up 1.2 percentage points from a year earlier. A higher net expense ratio means insurers are allocating more of their insurance revenue to attracting subscribers.
An official at the Financial Supervisory Service (FSS) said, "We plan to take a detailed look at the state of insurers' advertising from the perspective of consumer protection."