Life and non-life insurers are seeking a reduction in the premiums charged by the Korea Deposit Insurance Corp. (KDIC).
Korea Life Insurance Association (KLIA) chairman Shin Yong-kil said, “The premium has doubled over the past five years.”
“If the current increase rate continues, the annual premium for life insurers will far surpass KRW1tn ($880m) in 2022. Measures are needed to lower the premium given the adverse business circumstances for the industry.”
Insurers and non-life insurers paid over KRW1.1tn in 2017, up from KRW564bn in 2013. Life insurers alone will have to pay KRW851bn this year, according to a report in The Korea Times.
The insurers are calling for a separate deposit protection scheme, given they are not exposed to the risk of a ‘bank run’, the main reason the KDIC requires a high premium.
“A bank run is a fear that only concerns banks, not us,” a KLIA official said. “We only give an insurance payout when certain conditions are met, including the injury or death of a subscriber.”
This is different from banks’ deposits, the full amount of which should be given to customers with interest at account maturity.
“Insurance subscribers rarely seek such large withdrawals because they know they will be given only up to 30% of the principal if they cancel before the contract period matures,” the official said.
The KDIC, however, said no immediate change in policy was in store. While insurers are subject to a lower risk of a run compared to banks, risks still remain because about half their products are similar to instalment savings offered by banks, a KDIC official said.
“Half of the insurance products offer coverage and they give back the monthly premium accumulated in total upon maturity of the contract period,” he said. “So we must consider the risks are always there.”
Talks will continue among the Financial Services Commission, the KDIC and insurers. A