Ruling Party: "Penalties for Refusing Insurance Premium Card Payments"... Insurers Say "Infringement on Management Rights" (Comprehensive)

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 hall on the 17th. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Oh Hyung-gil] The ruling party's move to amend the law to punish insurance companies that do not accept insurance premiums by card has sparked strong opposition from the insurance industry, 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 premium increases.

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, arguing 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 premiums of 16.1225 trillion won.

Card payment ratios for Samsung Life Insurance, MetLife, and ABL Life Insurance are at the lowest levels of 0.1% to 0.2%. Kyobo Life Insurance, Hanwha Life Insurance, and Orange Life currently do not allow card payments for the insurance products they sell. 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 total 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 in the 25-35% range.

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

The high card payment ratio among non-life insurers is due to the acceptance of card payments 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. Insurance companies with affiliated card companies or a high proportion of contracts through non-face-to-face channels tend to have higher card payment ratios.

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 lighter, allowing card payments. However, for insurance where premiums are paid monthly, the fee burden is significant.

The fee rates applied by card companies to insurance companies are 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.

With the low-interest environment lowering the expected interest rate (the anticipated return on invested premiums) to around 2%, the fees themselves become a considerable burden. Insurance companies encourage payment by bank transfer by offering discounts.

Financial authorities also recommend card payments to insurance companies but approach the matter cautiously, as mandatory acceptance could lead to premium increases due to reduced profits from fees.

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 we discriminate against card users, but if we allow card payments for insurance premiums, 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.