As U.S. Dollar Remains Strong vs. Korean Won
Cancellation of U.S. dollar-based insurance contracts is increasing fast, with the Korean won-U.S. dollar exchange rate remaining high. Domestic life insurance companies are postponing the launch of new products as the exchange rate shows no signs of falling.
This year, the rate rose about 20 percent from 1,200 won or so to over 1,400 won per U.S. dollar. Under the circumstances, a total of 20,439 USD-based insurance contracts were cancelled from January to August, more than last year’s total of 19,718. Likewise, the number of new contracts was 25,696 and 74,418 in those respective periods.
In South Korea, insurance products of this type are handled mainly by foreign companies, including MetLife and AIA. Samsung Life Insurance launched its first USD-based insurance product in 2020, followed by DGB and Shinhan.
Those companies are in a dilemma as they cannot accelerate their marketing with more and more customers leaving. In December last year, the financial authorities added new regulations so that how exchange rate fluctuations affect insurance premiums and payments and cancellation refunds is numerically clarified. In addition, now, every insurer must check why its customer wishes to purchase its USD-based insurance product.