Sales of U.S. dollar-denominated insurance products are surging amid growing fears of a recession.
Prudential Life Insurance Korea sold 2,000 “Non-participating U.S. Dollar-denominated Whole Life Insurance” policies in July. The company had sold a total of 7,500 policies since October last year when it was first released. Reflecting a surging preference for U.S. dollars, 26 percent of the product's cumulative sales came in July alone.
AIA Life Insurance Korea sold 42 billion won (US$34.91 million) worth of “Non-participating Golden Time Pension Insurance” a month on average from the beginning of the year. Sales in the first half of the year reached 2,590 policies. MetLife Insurance Korea saw the number of cumulative subscriptions to “Universal Dollar-denominated Insurance” reach 25,000 in the first half.
A dollar-denominated insurance is a product requiring policyholders to pay premium and receive insurance payments in U.S. dollars. It enhances the customer’s value based on the competitiveness of U.S. dollars compared to the Korean currency. In the past, only those who had a large amount of assets chose dollar insurance products due to a high level of minimum amount required for subscriptions. However, dollar insurance products are becoming a main model of risk-free asset investment among the middle class as insurance companies have recently released savings insurance products that allow policyholders to insure with a small amount of money every month.
Accordingly, insurers are also strengthening their dollar insurance portfolios. Prudential Life has launched “Non-participating Dollar Term Rider” and “Non-participating Dollar Family Income Rider” to meet the demand for increased death benefits among policyholders of Non-participating Dollar Whole Life Insurance. MetLife Insurance’s “Non-participating Dollar Savings in Won Insurance” is a U.S. dollar savings insurance product that enables policyholders to pay premiums in the Korean currency. Hana Life Insurance has released “Non-participating Dollar ELS Equity-linked Life Insurance,” the first insurance product in Korea that requires all payments related to an insurance contract to be made in U.S. dollars, ranging from premium payments to withdrawal of policyholder reserves.
ABL Life Insurance’s “Non-participating Bonus Dollar Pension Insurance” saves up premiums at a fixed interest rate at the time of subscription. Orange Life Insurance’s “Non-participating Savings Insurance Growing with Dollar” allows policyholders to flexibly operate funds by making use of temporary suspension of payment and additional payment.
Meanwhile, a dollar insurance product is a long-term investment product that offers tax exemptions only when policyholders hold the product for more than 10 years. Policyholders of the product can easily suffer a loss as it charges high fees for early termination. Moreover, there is a possibility that the final results can vary depending on exchange rate fluctuations.