Last Year’s Insurance Premium Card Payments... Still Only 4.5% (Comprehensive)

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

Photo by Yonhap News

[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 card payment ratio accounted for 4.5% (741.1 billion KRW) of the total premium income (16.3322 trillion KRW) of 18 life insurance companies. This is a decrease of 0.2 percentage points from 4.7% last year. Since the disclosure began in the second quarter of 2018, it has remained stuck in the 4% range.

The products available for card payment are also concentrated. The card payment ratio for protection-type insurance is 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. Samsung Life Insurance only allows insurance premium card payments with Samsung Card. Accordingly, Samsung Life’s card payment index was only 0.1%. Large companies such as Hanwha Life and Kyobo Life, as well as Orange Life and Prudential Life, do not allow insurance premium card payments at all.

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.

Non-life insurers’ card payment index at 28.6%... Concentrated on auto insurance

During the same period, non-life insurance companies showed a relatively high card payment ratio. Among the total premium income (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 insurance were also concentrated mainly on mandatory automobile insurance. Auto 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 among all insurers at 88.3%. 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 in insurance premium card payments is the difficulty in narrowing the gap between the insurance and card industries over commission fees. Currently, insurance companies are subject to card commission 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 the 2% fee rate is practically the cost level when considering payment agency fees. Issues of fairness with other industries are also raised.

An industry insider 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 ultimately lead to an increase in insurance premiums."

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