COVID-19 Shock... "No Money to Pay Insurance Premiums" Surge in Households Canceling Insurance

[Asia Economy Reporter Oh Hyung-gil] Insurance planner Jeong Mi-ok (66, pseudonym) was devastated after hearing recent news about a client who had signed up for indemnity medical insurance and disease insurance through her.

Choi Yoon-soo (69, female), who ran a beauty salon, recently faced severe business difficulties as customers decreased due to the novel coronavirus infection (COVID-19). Eventually, unable to bear the insurance premiums, she decided to cancel her insurance. Jeong tried to persuade her to reduce the premiums or defer payments for a certain period instead of canceling, but she could not change Choi’s mind.

The problem arose after the insurance was canceled. Choi, who visited the hospital with a sore throat, was diagnosed with thyroid cancer. Upon hearing that Choi, who had already canceled her insurance, was struggling with hospital bills, Jeong expressed regret, saying, "Recently, there have been many cases of people canceling insurance due to family circumstances," and added, "People believe they are healthy, but incidents like Choi’s happen."

Due to the COVID-19 crisis, low-income people who are struggling to secure daily living or education expenses are increasingly terminating their insurance policies mid-term for livelihood reasons. However, there are also cases where insurance benefits cannot be received due to sudden illnesses or accidents. When unexpected high medical expenses occur, household finances can be completely shaken. Experts recommend postponing insurance cancellation until the last moment and finding ways to maintain at least minimal coverage.

According to the industry on the 27th, the surrender refunds of the three major life insurance companies increased by 17% year-on-year last month when COVID-19 spread nationwide. The surrender refunds for long-term insurance of the five major non-life insurance companies also rose by 22.7%.

Looking at monthly figures, the surrender refunds of the three large life insurers were 1.3819 trillion won in January, down from 1.4385 trillion won in the same period last year, but increased from 1.2249 trillion won to 1.4331 trillion won in February.

The surrender refunds of the five non-life insurers were 848.5 billion won in January and 897.8 billion won in February. Although January’s amount (900.8 billion won) was less than the previous year, February (731.1 billion won) saw a sharp increase.

It is analyzed that as debts increase or living expenses become burdensome, people are reluctantly canceling insurance contracts that require monthly payments.

The problem is that cases are emerging where diseases are discovered after cancellation, and insurance benefits cannot be received. An insurance planner said, "Since COVID-19, inquiries about insurance cancellations from subscribers struggling with financial difficulties have greatly increased," adding, "Sometimes, I hear that elderly people who discovered illnesses after canceling insurance are burdened with hospital bills."

COVID-19 is also affecting new subscriptions. The number of new long-term insurance contracts at A Non-Life Insurance Company decreased from about 58,000 in the first week of February to 55,000 in the second week. It dropped further to 48,000 in the third week and sharply declined to 44,000 in the last week.

The insurance industry expects that whether the trend of insurance cancellations will continue will be determined within this month. An industry official said, "Even this month, consultations about insurance cancellations through planners or call centers are increasing," and added, "Insurance can cause losses if canceled mid-term, and it is advantageous to keep it as a last safety net in case of emergencies."

This content was produced with the assistance of AI translation services.