[단독]Credit insurance to prevent ‘debt passing down’, comparative recommendation service to be canceled within the year

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The implementation of the credit life insurance comparison and recommendation service within the year, in which insurance companies repay money borrowed from financial institutions on behalf of borrowers due to sudden serious illness or death, was canceled. This is because there are so few insurance companies that handle this product that comparison is difficult. It is pointed out that efforts to revitalize the financial authorities and the insurance industry are needed as it is a ‘safety device’ that prevents the passing of debt and manages the soundness of lending financial institutions.

According to financial authorities and the insurance industry on the 29th, Credit Life Insurance‘s comparative recommendation service was scheduled to open within the year, but has been temporarily postponed until early next year.

An official from the financial authorities said, “The comparison recommendation service has a provision that requires at least three products to be compared, so the delay does not mean there is an institutional obstacle,” and added, “In order to operate the comparison recommendation service, insurance companies cannot be forced to release products.” “There is no one, but we are thinking about revitalizing it,” he said.

Credit insurance is a product designed to allow insurance companies to repay the balance of debt on behalf of a borrower who received a credit loan or mortgage from a financial institution if he or she dies due to injury or illness, or loses the ability to repay the debt due to disability or long-term hospitalization. Borrowers can prevent debt from being passed down due to non-repayment of loans, and financial institutions can reduce costs and uncertainty about loan recovery.

After the insurance product comparison recommendation service was launched early this year, this product was also expected to be implemented within the year, but its operation was delayed. This is because there are too few comparison targets. In fact, there are only two insurance companies that sell credit insurance to general customers through online channels (CM): BNP Paribas Cardiff Life Insurance and MetLife Life Insurance.

In the case of KB Life, it is only available to KB Kookmin Bank loan customers. Samsung Life Insurance is selling ‘Samsung Life Insurance Loan Guarantee Insurance’, which pays out the remaining debt in the event of the death of the borrower, but it is excluded from the comparison group as it is a purely guaranteed term insurance with similar characteristics and does not belong to the credit insurance group.

Finda, a fintech company licensed to provide a credit insurance comparison recommendation service, has signed a business agreement with Kyobo Life Planet and is awaiting product launch, but it is unclear whether this will be possible within the year. Kyobo Life Planet has begun product development, but procedures such as licensing still remain.

The reason insurance companies do not sell credit insurance well is because of low profitability and concerns about regulatory violations. Insurance premiums and recruitment fees are low, and in the case of banks, selling credit insurance in conjunction with loans can be misunderstood as ‘breaking’, an unfair business practice prohibited by the ‘Financial Consumer Protection Act‘. Even if it does not break the law, consumers can feel a psychological burden just because a financial institution recommends that loan customers sign up for insurance.

Low awareness is also a problem. It is active in major overseas countries to the extent that in Japan, anyone receiving a home mortgage loan is required to subscribe to credit insurance. However, the number of subscriptions to BNP Paribas Cardiff Life’s credit insurance through the Finda application (app) this year was only 3,266 as of the end of September. This year alone, it amounts to KRW 50.128 billion, less than 1% of the volume of newly processed household loans (KRW 7.8466 trillion) in September.