1. Credit-Linked Notes are Now Specifically Authorized
The previous Act banned providing any debt guarantees by third parties, thus, facially prohibiting many derivative-linked securities common throughout the Western world.
2. Enhanced Duties for Insurance Salespersons, Representatives and Insurers
Out of an impression by the government that many insurance companies are targeting the most vulnerable in society, the Act now provides many of the protections afforded to insurance customers provided by the Korean Financial Investment Business and Capital Market Act to financial product customers. Most of these duties are only applied to those selling to the “non-sophisticated” purchasers.A. Duty to Recommend a Product Suited to the Needs of the Insured
Thus, the insurance representatives/agents (“agents”) should review the insured present policies, purpose for insurance, age, assets, financial capabilities, earning potential, subscription period etc. and recommend only a product that is suited to the specific needs of the customer. I fear that many of the present agents will be unable to analyze the needs, thus, hopefully insurance companies will enhance training and make internal guidelines based on sample demographics.
B. Duty to Explain Basics of Insurance Product
Agents will be required to explain, at a minimum, the basics of the policy including the purpose, proceeds, payment period, termination clauses, specific conditions for payment etc.
C. Duty to Confirm Purchase of Double Coverage
The Act imposes the duty on the Agent to explore whether the customer has overlapping cost-based health insurance coverage and explain to the customer that they have overlapping coverage and may not need the present coverage.
3. Increased Restrictions on Misleading AdvertisementThe Act, in short, requires all advertising to contain specific disclaimers and for insurers not to engage in conduct that may mislead potential customers.