Ministry of Agriculture, Nonghyup Insurance Defaulted on 132.4 Billion Won and Refused to Pay

Crop Disaster Insurance 111.2 Billion KRW, Livestock Disaster Insurance 20.6 Billion KRW, etc.

Concerns Over Insurance Companies' Passive Sales Due to Unpaid Claims

Seo Sam-seok, a member of the Democratic Party of Korea, attended the National Assembly's audit of the Ministry of Agriculture, Food and Rural Affairs held on the 18th and questioned Minister Kim Hyun-soo of the Ministry of Agriculture./Photo by Yoon Dong-joo doso7@

[Asia Economy Honam Reporting Headquarters Reporter Seo Young-seo] It has been revealed that the Ministry of Agriculture, Food and Rural Affairs has not properly provided government subsidies to NongHyup Property & Casualty Insurance (hereinafter NongHyup P&C), which handles crop disaster insurance and livestock disaster insurance.

According to the "Unpaid Agricultural Policy Insurance Subsidies Status" submitted by the Ministry of Agriculture, Food and Rural Affairs to Seo Sam-seok, a member of the Democratic Party of Korea (Yeongam, Muan, Sinan) on the 23rd, the unpaid subsidies to NongHyup P&C from 2017 to this year amount to 132.441 billion KRW.

By insurance type, 111.2 billion KRW for crop disaster insurance, 600 million KRW for income protection insurance, and 20.6 billion KRW for livestock disaster insurance have not been paid.

The unpaid subsidies by the Ministry of Agriculture, Food and Rural Affairs include the government's share of insurance premiums for policyholders as well as operating expenses for the insurance business such as recruitment commission and personnel costs.

The law and guidelines specify that insurance premiums and operating expenses for crop disaster insurance and livestock disaster insurance should be supported to the insurance companies.

According to Article 19 of the Agricultural and Fishery Disaster Insurance Act and the business implementation guidelines, the government's support rate for insurance premiums of crop disaster insurance and livestock disaster insurance is 50%, and the support rate for operating expenses is 100% and 50%, respectively.

While the Ministry of Agriculture, Food and Rural Affairs does not provide subsidies, it instructs insurance companies to accept all applicants. From NongHyup P&C’s perspective, they cannot block subscriptions, but passive sales efforts are expected to negatively affect the increase in policy insurance subscription rates.

As of last year, the subscription rate for crop disaster insurance was 38.8%, and increasing the subscription rate and expanding coverage of disaster insurance to secure income safety nets for farmers is one of the major policy tasks in the agricultural sector.

The Ministry of Agriculture, Food and Rural Affairs reflects some of the unpaid subsidies in the budget every year, but the progress is slow. This year’s budget included 120.7 billion KRW to repay unpaid subsidies from 2018, and the next year’s government proposal included 34.7 billion KRW for unpaid subsidies from 2019.

Although the Ministry intends to sequentially include the remaining 132.4 billion KRW in the budget, it has yet to present any concrete measures regarding the accumulated interest from delays and the 15.2 billion KRW unpaid subsidies from 2017 for crop disaster insurance and income protection insurance.

Assemblyman Seo Sam-seok said, “If subsidies that are supposed to be paid to insurance operators based on laws and guidelines are not properly provided sluggishly, the reliability of the policy insurance system operation could be seriously undermined,” and added, “Unpaid subsidies should be paid promptly through budget allocation.”