Sales of whole-life insurance policies that return 100% of premiums paid after seven years will be suspended from the end of September.
The Financial Supervisory Service (FSS) distributed a set of measures on the 21st aimed at preventing the mis-selling of so-called "700 whole-life" policies, issued through its supervisory guidance.
The FSS has long pushed to stop life insurers from raising surrender values on whole-life products to the point that they are mistaken for savings products. Since a 2015 deregulation let insurers freely design their own products without prior standardized templates, 99% of new products have been these self-developed offerings, allowing insurers to keep creating products that skirt disclosure rules.
Prominent examples of such products include short-payment whole-life insurance, executive term insurance and corporate-targeted policies. Life insurers have continued to market these as savings vehicles, citing the feature that policyholders can receive more in surrender value than they paid in premiums at the time of cancellation.
The problem lies with 700 whole-life policies. They are designed to pay back less than the premiums paid if a contract is cancelled before seven years, while sharply raising the surrender value at the seven-year mark.
