Life Insurers to Offer Optional Death Benefit Forfeiture from July

Starting in July, the structure of life insurers' health insurance products will change. This initiative, devised by financial authorities and insurers, aims to broaden consumer choice and protect their rights.

The reform primarily involves shifting from the current structure, where accumulated funds are forfeited upon the policyholder's death in exchange for lower premiums, to a bifurcated system allowing consumers to choose between a premium discount and the refund of accumulated funds. Consumers will be able to opt-in to the 'death-benefit forfeiture rider,' which offers lower premiums by not paying out accumulated funds upon death.

Under the bifurcated structure, consumers will have to choose between 'lower premiums' and 'refund upon death.' The addition of a refund option is expected to increase insurers' payout burdens, potentially leading to reduced premium discounts or overall premium hikes.

The reform will first apply to new product designs. Whether it will be retroactively applied to existing contracts requires further review. Post-reform, the market is expected to feature products focused on premium discounts coexisting with refund-based products. As the premium difference between the two types may exceed the refund amount, a comparison based on the entire payment period will become crucial.