Ruling "Penalties for Refusing Insurance Premium Card Payments"... Insurers Claim "Infringement on Management Rights"

Ruling Party "Card Users Discriminated Against by Insurance Premium Payments"
Insurers "It's Like Asking to Pay Savings with Cards"
Opposition Cites "Excessive Fees Ultimately Lead to Insurance Premium Increases"

Speaker of the National Assembly Park Byeong-seok is presiding over the government questioning session on education, social, and cultural issues held at the National Assembly plenary session hall on the 17th. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Oh Hyung-gil] As the ruling party moves to amend the law to punish insurance companies that do not accept insurance premiums by card, the insurance industry is strongly opposing it, calling it an excessive infringement on management rights.

The insurance companies are pushing back against the ruling party's claim that they discriminate against card users, arguing that the excessive burden of payment fees could ultimately lead to an increase in insurance premiums.

According to the insurance industry on the 18th, Lee Jung-moon, a member of the Democratic Party of Korea, recently proposed an amendment to the Insurance Business Act that requires insurance companies to accept payment of insurance premiums via credit cards, debit cards, or prepaid cards. The bill includes a penalty clause that imposes up to one year imprisonment or a fine of up to 10 million won if payment is refused, stating that not accepting card payments constitutes discrimination against card users.

The basis for this is the low card payment ratio among insurance companies. The total insurance premiums received via card payments by 18 domestic life insurance companies amounted to 717.6 billion won in the first half of the year, accounting for only 4.5% of the total insurance premiums of 16.1225 trillion won.

The card payment ratios of Samsung Life Insurance, MetLife, and ABL Life Insurance are at the lowest levels, around 0.1% to 0.2%. Insurance products currently sold by Kyobo Life, Hanwha Life, and Orange Life do not allow card payments. Card payments are only accepted for products that previously allowed them.

On the other hand, non-life insurance companies allow card payments to some extent. As of the first half of the year, the credit card payment index for 15 non-life insurers was 28.8%. Out of the total insurance premiums of 19.5348 trillion won, 5.6315 trillion won were paid by card.

AXA General Insurance had a credit card payment ratio of 79.9% of total premiums, followed by ACE Insurance and Hana Non-Life Insurance at 67.5% and 60.7%, respectively. Large companies such as Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance recorded ratios between 25% and 35%.

Life Insurers’ Card Payment Only 5%... Non-Life Insurers at 29%

The reason for the high card payment ratio among non-life insurers is that card payments are allowed for automobile insurance. The card payment index for automobile insurance reaches 77.8%. In contrast, the card payment indices for long-term protection insurance and savings insurance are only 13.0% and 5.2%, respectively.

The life insurance industry explains that this is due to structural reasons that prevent card payments. Automobile insurance is paid once a year, so the fee burden is lower, allowing card payments, but for insurance where premiums are paid monthly, the fee burden is significant.

The fee rate applied by card companies to insurance companies is reported to be in the 2-3% range of the payment amount. For a whole life insurance policy with a monthly premium of 200,000 won, accepting card payments would mean paying 4,000 to 6,000 won in fees every month. In a low-interest environment where the expected interest rate (the anticipated return on invested premiums) has dropped to the 2% range, the fees themselves become a considerable burden.

Financial authorities also recommend card payments to insurance companies but are cautious about enforcing it, as the resulting decrease in profits due to fees could lead to premium increases.

Especially since discussions on fee reductions have not progressed, insurance companies argue that if a law is enacted to punish those who do not accept cards, they will not even be able to negotiate with card companies.

An insurance industry official said, "Although utility bills and taxes can be paid by card, insurance is different in nature," and added, "They say it discriminates against card users, but if card payments for insurance premiums are allowed, I want to ask whether installment savings or fund investments will also allow card payments."

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