South Korea Bans Misleading Whole-Life Insurance Products
South Korea’s financial watchdog, the Financial Supervisory Service (FSS), has instructed life insurers to cease selling whole-life insurance products that guarantee a 100% return of premiums at the seven-year mark. This directive, issued on September 21, requires insurers to halt sales of these policies, known as “700 whole-life” products, by the end of September.
These insurance products have been designed to return less than the total premiums paid if cancelled early, but then sharply increase the surrender value at the seven-year mark to refund the full premium amount. The FSS has concluded that this design leads consumers to treat the policies as savings products rather than insurance, prompting the regulatory action.
A decade of deregulation under scrutiny
The FSS’s decision stems from a market shift over a decade ago. In 2015, deregulation allowed South Korean insurers to design their own products without standardized templates. As a result, 99% of new life insurance products have been self-developed, giving insurers design freedom but making consistent disclosure enforcement harder for the regulator.
The FSS notes that the 700 whole-life product is not the only category affected. Other products, including short-payment whole-life insurance, executive term insurance, and corporate-targeted policies, were also identified as marketed primarily on savings or surrender value features rather than protection.
This is not the FSS’s first such intervention. In November 2024, the regulator criticized excessive competition in short-term payment life insurance and restricted its sale, alongside actions against other categories. Industry officials responded critically at the time.
“Due to frequent interventions by financial authorities in product sales, insurers have lost their motivation to develop new products,” one company official told The Korea Times. “Many hope for a more considerate approach that encourages self-regulation and improvement within the industry, rather than constant external interference,” the official added.
Another official said: “It seems that the more the FSS intervenes in sales-related matters, the harder it becomes to aggressively promote products.” The September action on 700 whole-life products suggests the FSS has not changed course.
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A shrinking market
The broader whole-life market has been contracting regardless of the latest regulatory action. FSS data cited by The Korea Times shows new whole-life contracts fell from 1.65 million in 2020 to 1.06 million in 2024. Over the same period, total contract value dropped approximately 45%, from 88.6 trillion won to 49.1 trillion won.
Consumer appetite has been a factor. One policyholder who cancelled a decade-long whole-life policy told The Korea Times the product “felt like an asset I couldn’t use and had forgotten about,” adding that cancellation – even at a loss of principal – was preferable to continuing premium payments.
Financial complaints across the sector have also risen. FSS figures show the number of cases increased from 93,842 in 2023 to 128,419 in 2025, a 36.9% jump, with insurance among the sectors recording the sharpest increases.
Samsung Life, Hanwha Life, and Kyobo Life, the three dominant carriers, which together hold close to half of the South Korean life market, are all understood to have established positions in short-payment whole-life products broadly, according to The Asia Business Daily.
Regional regulatory trends
South Korea’s action sits within a wider regional pattern. In September 2025, Hong Kong’s Insurance Authority (IA) and Hong Kong Monetary Authority (HKMA) issued a joint circular stating they had “observed that certain insurance products currently marketed in Hong Kong may create confusion among prospective policy holders regarding their nature”, specifically, that products with savings features “may be misunderstood as bank deposits.”
The circular requires all such products to include the word “insurance” in their names, in both English and Chinese. Phase one applied from January 1, 2026. Phase two, covering existing in-scope products still on sale, takes effect January 1, 2027.
Hong Kong moved on naming. South Korea moved on structure. Both regulators reached the same underlying conclusion: disclosure alone is insufficient when product design itself generates the confusion.
