The financial authorities will review the sales procedures for whole life insurance, where misselling problems persist. Misselling at event venues such as wedding fairs has continued, and, with recent issues over the diversion of operating funds at care facilities emerging, observers say the financial authorities have moved to inspect the market.
According to the financial sector on the 11th, the financial authorities are drawing up a plan to review the whole life insurance sales procedures at 17 life insurers. The review is expected to use mystery shopping, in which investigators from an outside specialist firm pose as customers and assess whether insurance solicitors follow proper sales procedures.
Whole life insurance is a protection-type product that pays a benefit to survivors when the policyholder dies, and it has high premiums and large losses if canceled midterm. It is not suitable for the policyholder's own asset building or retirement planning, but, on the ground, it is sometimes introduced as a "product advantageous for financial investment." According to the Korea Life Insurance Association, 36.8% (1,799 cases) of life insurers' complaints in the first quarter of this year were related to whole life insurance.
The Financial Supervisory Service recently warned consumers that misselling of whole life insurance continues at various event venues, including one-day baking classes and wedding fairs. According to the Financial Supervisory Service, complaints were filed that employees of general agencies (GA) recommended signing up for whole life insurance at one-day class events such as making Dubai jjondeuk cookie. There were also cases where insurance sales booths were set up at event venues such as baby fairs and wedding fairs to recommend and sell whole life insurance to consumers who needed a lump sum.
Some care facilities were also caught misappropriating operating funds through whole life insurance. A care facility, after receiving consulting from a GA that also operates as a tax firm, paid whole life insurance premiums out of operating funds, then changed the policyholder to the representative personally and pocketed the surrender value, thereby embezzling funds.
The financial authorities are conducting a full survey of whole life insurance subscriptions that designate the representative or other individuals as the insured at about 30,000 nonprofit long-term care institutions nationwide.
In this review, the financial authorities plan to require life insurers where multiple cases of misselling—such as violations of the duty to explain or improper solicitation—are found to draw up improvement plans that include staff training and internal inspections.