Preventing Insurance Disputes on Caregiver Platforms... Also Reducing the Burden on Overdue Borrowers in Mutual Finance

Financial Supervisory Service Holds 7th Fair Finance Promotion Committee Meeting
Improvement of Insurance Terms for Caregiver Daily Wage Use
Mutual Finance Sector Allows Change of Interest Payment Date for Overdue Borrowers

From now on, the definition of a caregiver will include 'caregivers through intermediary services.' When using caregivers via intermediary platforms, some insurance companies have not paid out long-term care insurance benefits, prompting financial authorities to devise improvement measures.

On the 28th, the Financial Supervisory Service (FSS) held the 7th "Fair Finance Promotion Committee" meeting to deliberate on two tasks: improving insurance terms related to daily caregiver usage fees and improving procedures for partial interest payments by delinquent borrowers in the mutual finance sector.

As society ages and the incidence of geriatric diseases increases, the burden of private caregiving costs has led to growing demand for long-term care insurance. Long-term care insurance guarantees costs such as daily caregiver usage fees when the insured uses caregiving services. Currently, 12 life insurance companies and 10 non-life insurance companies are selling long-term care insurance products.

Although the long-term care insurance market is expanding, insurance terms remain inadequate. Recently, as demand for caregivers has increased, the caregiver intermediary platform market has rapidly grown; however, some insurance terms do not include 'caregivers through intermediary platforms' in their definition of caregivers. This raises concerns about consumer harm due to non-payment of insurance benefits. In some insurance terms, even if formal caregiving is exaggerated to inflate claims, benefits may be paid if document requirements (such as business registration certificates) are met, potentially leading to moral hazard through unnecessary abuse of caregiving services.

The FSS plans to consult with the insurance industry in the fourth quarter of this year to clearly and reasonably improve ambiguous or differing terms among insurers. The definition of caregivers will include 'caregivers through caregiver intermediary services' to prevent consumer harm and disputes. However, intermediary services will be limited to companies registered under the Employment Security Act as job placement businesses to prevent false claims through indiscriminate providers. The grounds for insurance benefit payments will be restricted to 'cases where substantial caregiving services are used,' and a clause allowing requests for additional supporting documents to verify this will be introduced to prevent moral hazard such as excessive claims.

The FSS also plans to improve procedures to allow changes to interest payment dates when delinquent borrowers in the mutual finance sector make partial interest payments.

Currently, when delinquent borrowers want to change the interest payment date after making partial interest payments, acceptance varies by sector. Banks and savings banks allow changes to the interest payment date by the number of days corresponding to the interest payment amount if the delinquent borrower requests it. However, the mutual finance sector does not permit changes to the interest payment date.

This results in a heavy burden for delinquent borrowers in the mutual finance sector, as delinquency continues and late interest keeps accruing even after partial interest payments. The point of loss of benefit of term is not extended, increasing risks and losses from loss of benefit of term and potentially reducing borrowers' willingness to repay.

The FSS plans to improve this by allowing changes to the interest payment date when partial interest payments are made after delinquency in the mutual finance sector, aiming to ease the burden on delinquent borrowers in the first half of next year.

Kim Mi-young, Director of the Financial Consumer Protection Department at the FSS (Chairperson), said, “The tasks to resolve concerns about disputes due to ambiguous terms in the sale of long-term care insurance and to protect borrowers disadvantaged by delinquent loan interest have been appropriately addressed. As the long-term care insurance market continues to grow, we hope to strengthen the social safety net role of long-term care insurance and actively cooperate with the industry to ensure that unnecessary requests for additional supporting documents do not cause inconvenience to consumers in using caregiving services and claiming insurance benefits.”