Insurance Premium Card Payment... Still Limited to 4.5%

As of Q4 Last Year, Life Insurers 4.5%, Non-Life Insurers 28.6%
Disagreement Over Fees Between Insurance and Card Companies

[Asia Economy Reporter Ki Ha-young] Although consumer demand for paying insurance premiums by card continues, the level of insurance premium card payments remains stagnant.

According to the disclosure by the Life and Non-life Insurance Association on the 8th, as of the fourth quarter of last year, the proportion of card payments among the total insurance premiums (16.3322 trillion KRW) of 18 life insurance companies was 4.5% (741.1 billion KRW). This is a decrease of 0.2 percentage points from 4.7% last year. Since disclosures began in the second quarter of 2018, it has remained stuck in the 4% range.

The products eligible for card payments are also concentrated. The card payment ratio for protection-type insurance was relatively high at 9.2%, but the card payment ratios for savings-type insurance and variable insurance were only 0.5% each. Even then, the target is limited to existing subscribers or affiliated card users. Large companies such as Hanwha Life and Kyobo Life, as well as Orange Life and Prudential Life, do not allow insurance premium card payments.

Among all life insurance companies, LINA Life had the highest card payment ratio at 36.3%. AIA Life and Shinhan Life followed with 19.2% and 14.5%, respectively.

During the same period, non-life insurance companies showed a relatively higher card payment ratio. Among the total insurance premiums (19.9031 trillion KRW) of 16 non-life insurers, the card payment ratio was 28.6% (5.6937 trillion KRW), an increase of 1.4 percentage points from 27.2% last year.

Card payments in non-life insurers were concentrated mainly on mandatory automobile insurance. Automobile insurance accounted for 73.3% of all card payments, while long-term protection insurance and long-term savings insurance recorded 13.0% and 5.0%, respectively.

By company, digital non-life insurer Carrot Insurance had the highest card payment ratio at 88.3% among all insurers. It was followed by AXA Insurance at 82.1%, ACE Insurance at 68.5%, and Hana Insurance at 60.7%.

The reason for the poor performance of insurance premium card payments is the difficulty in narrowing the gap between the insurance and card industries over the issue of fees. Currently, insurance companies are subject to card fee rates of 1.8?2.2%, which is the level applied to large merchants.

The insurance industry argues that it is difficult to bear card fees amid a challenging business environment such as low interest rates. They believe that for card payments to be activated, card fees need to drop to 1%. On the other hand, the card industry claims that a 2% fee rate is practically the cost level when considering payment agency fees. Issues of fairness with other industries are also raised.

An industry official pointed out, "Life insurers, which mainly handle long-term products, inevitably tend to be reluctant to accept card payments because fees occur every month," adding, "The burden of card fees could eventually lead to an increase in insurance premiums."

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