SEOUL, Dec. 27 (Korea Bizwire) – A surge in life insurance cancellations in the past five years is one symptom of the economic downturn and financial hardships faced by South Korean households.
Provided by the Korea Life Insurance Association (KLIA), records show there were 6.59 million life insurance policy cancellations last year, 54.1 percent more than in 2011.
The 6.59 million figure incorporates both terminated coverage due to insufficient payment of premiums as well as cases of customers cancelling their life insurance.
However, the latter was almost twice as significant, with 4.39 million cancellations attributed to customer request as opposed to 2.2 million cancellations via termination.
Since 2011, terminations grew by 77.2 percent while customer cancellations rose by a lower 44.7 percent.
The KLIA has expressed concern that the recent bump in interest rates will have an adverse effect on life insurance holders and firms, leading to more cancellations.
According to researchers at the KLIA, when market interest rates increase, so do insurance cancellations.
This is because rising interest rates on loans taken out by households increase their financial burden, rendering certain insurance policies more of a luxury than a necessity.
The KLIA has advised prospective customers of life insurance products to think very carefully on purchasing coverage, as refunds after cancellation are either nonexistent or are lower in amount than accumulated premiums. Therefore, if one decides to purchase a life insurance plan, the best course of action is to continue to stick with it.
To reduce the financial burden of keeping insurance plans, the KLIA has pointed out that discount deals exist for customers who match certain criteria. Health discounts for non-smokers for example, and cheaper insurance premiums for parents with children are some of the options available.
Kevin Lee (firstname.lastname@example.org)