More people canceling insurance policies

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By Kim Bo-eun

A working mom, surnamed Kim, is seriously mulling cancelling an insurance policy she signed up for her and her daughter last year due to the stock market crash in recent weeks caused by the novel coronavirus pandemic.

Kim, 40, signed up for a variable life insurance policy that invests 100 percent in U.S. stocks. “The plunge in U.S. stocks is resulting in major negative returns. Considering my income may be affected in coming months, I am thinking about possibly cancelling the policy.”

Such concerns have led to insurers seeing more cancellations on policies amid the coronavirus pandemic.

According to an official of a life insurer, Friday, the firm saw an increase in the number of cancellations in the past month after the coronavirus crisis began escalating.

"The number of cancellations has grown slightly," the official said. "They have mainly been cancellations of savings-type policies. This is seen as a move by policyholders to transfer their funds into more profitable investment options."

The number of inquiries about variable life insurance policies has also surged in the same period, the official said.

Variable life insurance is a permanent life insurance product with separate accounts comprised of various instruments and investment funds, such as stocks, bonds and equity funds.

The inquiries are based on plunges in global and local stock markets based on fears of the spreading coronavirus, resulting in negative returns.

Korean stocks have been on a free fall since the beginning of this month, after the virus began spreading to the U.S. and Europe, crashing to below the 1,500 level, Thursday. At 1,457.64, it was the lowest point in 11 years.

Data shows overseas investments account for 16 percent of variable life insurance policies' net assets. U.S. markets wrapped up the worst week since the 2008 financial crisis last week.

"When we get calls from policyholders we refer them to staff who are in charge of consultations for investments. The number of cases of such consultations has jumped by four times from the previous month," the official said.

He added policyholders are also spending more time on applications to check the rates of return on their policies, as they turn negative.

One insurer stated last month it would enable policyholders in Daegu and North Gyeongsang Province, which has been hit hardest by the virus here, to request refunds of their policies via telephone.

The measure is intended to facilitate cancellations of policies for people such as the self-employed who see their livelihoods endangered amid the public's self-quarantine measures.

Several life insurers are also offering a grace period of six months for insurance premiums as well as for interest rates on insurance-backed loans.