If the Right to Request an Interest Rate Reduction Is Not Disclosed, a Fine of 10 Million KRW Will Be Imposed on the 'Insurance Company'

Gradual Reduction of Card Company Insurance Recruitment Share to 25% by 2024

[Asia Economy Reporter Kangwook Cho] If insurance companies fail to inform customers about the right to request an interest rate reduction, they will face fines of up to 10 million KRW. The regulation on the insurance solicitation ratio by credit card companies will be gradually lowered to 25% by 2024.

On the 24th, the Financial Services Commission announced that the Enforcement Decree of the Insurance Business Act, which includes obligations to inform about the right to request an interest rate reduction, has passed the Cabinet meeting.

The right to request an interest rate reduction allows customers to ask financial institutions to lower their loan interest rates when their income or assets increase due to employment, job change, promotion, or when their credit rating improves after taking out a loan. Under current regulations, if an insurance company fails to notify customers of this right, a fine of up to 10 million KRW is imposed on the 'founders, etc. of the insurance company.'

However, according to the new Enforcement Decree, the subject of the fine will change to the 'insurance company.' While the Mutual Savings Banks Act and the Specialized Credit Finance Business Act impose fines on financial companies, the Insurance Business Act previously targeted founders and directors, which was considered unfair and burdensome to insurance company employees.

Additionally, the new Enforcement Decree will gradually apply the '25% rule,' a regulation on the insurance solicitation ratio for credit card companies. To increase the feasibility of compliance by card companies, the solicitation ratio will be gradually lowered from 66% in 2021 to 50% in 2022, 33% in 2023, and 25% in 2024.

The 25% rule restricts the proportion of annual insurance product sales solicited by a credit card company that a specific insurance company can account for, ensuring it does not exceed 25%. The financial authorities have attempted to apply the 25% rule to card insurance since 2013 but have continuously postponed it considering the insufficient market formation.

Furthermore, the duties of the Korea Insurance Development Institute, which calculates insurance rates, will be expanded to include management of vehicle information such as parts information and accident records, as well as research on vehicle repair costs related to automobile insurance. Establishing a vehicle information network is expected to enable accurate insurance payments and reduce repair periods.

The revised Enforcement Decree of the Insurance Business Act will take effect from the date of promulgation after the President's approval and other procedures.