Kim Mo, a self-employed man in her 40s who recently lost her husband in a car accident, learned that her husband received a credit loan of 40 million won from a bank in his lifetime. Due to the family situation worsened by the novel coronavirus infection (Corona 19), the situation where two children are raised alone. However, Kim was relieved to learn that her husband signed up for’credit life insurance’ at the time of loan.
There are insurance products that repay loans for death or disability, etc. Shutterstock
#Pay off debt instead of debt when you die?
=Credit insurance refers to a product in which the insurance company pays off the debt instead if the debtor cannot repay the loan due to an insurance accident such as death, serious disability, or illness. It is different from loan guarantee insurance, which is a product in which an insurance company exercises reimbursement rights to the debtor’s survivors instead of repaying the loan instead. Credit insurance claims are not made.
=Of course, when the debtor dies, there is a way to avoid inheritance of debt by giving up or limited approval. However, there are cases in which unexpected debts may be inherited considering the fact that it must be reported to the court within 3 months to take effect, and that even if the first-tier heirs reject the inheritance, the debt burden is sequentially transferred to the second and third-ranking places. For this reason, the Korea Insurance Research Institute diagnosed that “if you subscribe to credit insurance, you can secure a family’s livelihood in situations such as the death of a debtor.”
#80s started but few vendors
There are not many sales outlets for credit insurance in Korea. Shutterstock
In Korea, the credit insurance market opened up in 1989 when Korea Guarantee Insurance launched credit card credit insurance, which guarantees repayment of loans to credit card companies. Home rental credit insurance for individuals was also launched in 1995. The jeonse money return guarantee insurance provided by SGI Seoul Guarantee and others came from here.
=BNP Paribas Cardiff Life Insurance first launched in 2002, a credit life insurance product that pays off debts when an individual debtor dies. MetLife Life Insurance has also sold its products since 2016, but stopped selling it after a year. The latest fintech company’Pinda’ has partnered with BNP Paribas Cardiff Life on the 1st to guarantee up to 50 million won when a user who received a loan through Pinda dies in an unexpected accident or suffers more than 80% of disability. The product’Pinda Loan Security Plan’ has been released.
= If you subscribe to the product, the premium will be borne by Pinda for up to 12 months. Recently, in the peer-to-peer (P2P) industry, some companies have planned such loan insurance products, but there have been times when they have failed. As a condition of providing loans, it is difficult to sell banks because the act of requiring borrowers to purchase a specific insurance (‘breaking’) is prohibited, and it is difficult for insurance companies to directly identify the customer’s loan information and recommend subscription. It is difficult to attract customers, but the industry evaluation is that the profits and losses are not correct because the amount to be paid is large in case of an insurance accident.
#Unemployment guaranteed overseas
As household debt increases rapidly, the need for credit insurance increases. pixabay
=The world’s first commercial credit insurance was sold by Britain in 1852. Currently, Euler Hermes, an affiliate of German financial company Allianz, is the world’s largest credit insurance company. In addition, various types of consumer credit insurance products have already been launched and operated overseas such as the US, Japan, Australia, and Italy.
In the case of the United States, it is subdivided into’credit accident insurance’, which pays off debts by insurance companies in case of a disability, and’credit unemployment insurance’, which pays off debts when involuntary unemployment occurs.
= Recently, as domestic household debt has increased rapidly, the need to revitalize credit insurance has been raised in Korea. In 2018, Rep. Park Seon-sook proposed an amendment to the Insurance Business Act, which excluded the solicitation of credit insurance from acts prohibited by the current law. At the time, the Korea Insurance Research Institute also pointed out that “the supervisory authorities need to consider deregulation with a focus on improving the current structure in which credit insurance solicitation is fundamentally impossible at the time of bank lending.”
=However, there is a need for strict regulatory provisions as side effects such as extreme choices for loans or intentional injury may occur. In fact, Australia has a disclaimer from insurance payments for certain causes such as extreme choices to prevent such side effects.
Reporter Sung Ji-won
