Insurance Woes: Delinquencies and Fraud Rise amid Economic Downturn
Table of Contents
Seoul, May 3, 2025 – As economic pressures mount, South Koreans are increasingly struggling to maintain their insurance coverage, leading to a rise in policy lapses and a concerning surge in insurance fraud.
Lapsed Policies and “Recession Loans”
The number of insurance policies lapsing due to unpaid premiums is on the rise, while new policy acquisitions are declining. Simultaneously, insurance contract loans, often dubbed “recession loans,” have reached record highs, according to industry data released Thursday.
Household loans from insurance companies saw a importent increase, climbing by 700 billion won to reach 135 trillion won by the end of last year, compared to 135 trillion won at the close of 2023.
Insurance contract loans, which allow policyholders to borrow against the cash value of their policies, hit 71.6 trillion won at the end of last year, a 600 billion won increase from the previous year. These loans are attractive because they typically don’t require a credit check and don’t impact credit scores.
however, financial experts caution that borrowers must understand the terms and conditions.Failure to repay these loans can lead to policy cancellation and loss of coverage.
The total value of life insurance contracts in force decreased by 1.6% last year, falling to 2,337 trillion won from 2,374 trillion won at the end of 2023. This decline is attributed to both fewer new policies being written and an increase in policies lapsing due to non-payment.
New life insurance contracts decreased by 3.7% last year,totaling 235 trillion won. Policies lapsing due to non-payment increased by 4.3%, reaching 220 trillion won.
“As household finances become strained, more individuals are struggling to afford their existing insurance premiums, leading them to take out insurance contract loans or simply let their policies lapse,” said a financial sector official, who spoke on condition of anonymity. “This, in turn, is contributing to a decrease in new insurance purchases.”
Insurance Fraud on the Rise
adding to the industry’s woes, insurance fraud is also becoming increasingly prevalent, driven by economic desperation and the allure of swift money.
Earlier this year, a Ponzi scheme involving Mirae Asset Financial Services and PIS Pine Services defrauded 765 insurance contractors of 34.2 billion won. The scheme targeted young people with promises of “salary management” and invested their money in risky ventures.
The Financial Supervisory Service (FSS) recently issued a consumer warning about new types of insurance fraud, frequently enough promoted through social media with promises of easy money through “loans” or “high-paying part-time jobs.” These schemes frequently enough target young adults in their 20s and 30s who are active on social media and facing financial difficulties.
The FSS warns consumers to be wary of any offers guaranteeing high profits or principal through online communities or social media. They emphasize that filing false insurance claims is a serious crime.
Actual insurance fraud cases are increasing annually. Last year, the total value of insurance fraud reached 1.15 trillion won,a 3% increase from the previous year. Auto insurance fraud accounted for nearly half of this amount, totaling 570.4 billion won, a 4.2% increase year-on-year.
While the largest number of perpetrators were employees (2,6509),a notable increase was seen in fraud committed by office workers. Fraud committed by the unemployed, day laborers, full-time homemakers, and students saw a slight decrease.
Notably, insurance fraud among individuals in their 60s and older increased substantially last year. The number of perpetrators in this age group rose by more than 3,200 compared to the previous year and more than 5,000 compared to 2022.
“recently, insurance fraud is a structure that can be a perpetrator or victim around, so consumers need special attention,” said an insurance company official. “Insurance is mostly long-term guarantee products, and there is no way to use insurance, and all inducing them are insurance fraud.”
The rise in both policy lapses and insurance fraud highlights the growing financial strain on South Korean households and the need for increased vigilance and consumer education.
Insurance Woes: south Korean Households Struggle with Rising Costs and Fraud
this article analyzes the recent trends in the South Korean insurance market, focusing on rising policy lapses, increased reliance on loans, and a surge in insurance fraud. the information is derived entirely from the provided source material.
Frequently Asked questions About the South Korean Insurance Market
Q: What is the current state of the South Korean insurance market?
A: The South Korean insurance market is facing considerable challenges. As of May 3, 2025, the sector is experiencing a rise in policy lapses due to unpaid premiums. There has been a significant increase in insurance fraud alongside a decline in new policy acquisitions.
Q: What are “recession loans” and how are they impacting insurance?
A: “Recession Loans” in this context refer to insurance contract loans, which allow policyholders to borrow against the cash value of their policies. These loans have reached record highs. they’re attractive because they often bypass credit checks. However, failure to repay these loans can lead to policy cancellation and the loss of coverage.
Q: How have insurance contract loans changed?
A: Household loans from insurance companies saw an increase of 700 billion won, for 135 trillion won during the last year end. Insurance contract loans hit 71.6 trillion won,a 600 billion won increase from the previous year.
Q: What’s happening with life insurance policies?
A: The total value of life insurance contracts in force decreased by 1.6% last year, dropping to 2,337 trillion won, compared to 2,374 trillion won at the end of the previous year. New life insurance contracts decreased by 3.7%, totaling 235 trillion won. Policies lapsing due to non-payment increased by 4.3%, reaching 220 trillion won.
Q: Why are so many policies lapsing?
A: A financial sector official,speaking anonymously,stated that,as household finances become strained,more people struggle to afford premiums,leading to policy lapses or contract loans. This contributes to a decrease in new insurance purchases.
Q: Is insurance fraud a growing problem?
A: Yes,insurance fraud is on the rise in south korea. It is indeed driven by economic pressures and the allure of speedy money.
Q: Can you give an example of recent insurance fraud?
A: Earlier this year, a Ponzi scheme involving Mirae Asset Financial Services and PIS Pine Services defrauded 765 insurance contractors out of 34.2 billion won. The scheme targeted young people with promises of ”salary management” and invested their money in risky ventures.
Q: What are the authorities doing about insurance fraud?
A: The Financial Supervisory Service (FSS) has issued consumer warnings about new types of insurance fraud. These often appear on social media, offering easy money through “loans” or “high-paying part-time jobs.” The FSS warns consumers to be wary of offers guaranteeing high profits and emphasizes that filing false insurance claims is a serious crime.
Q: How much has insurance fraud increased?
A: Actual insurance fraud cases are increasing annually. Last year, the total value of insurance fraud reached 1.15 trillion won, a 3% increase year-on-year. Auto insurance fraud accounted for nearly half of this amount, totaling 570.4 billion won, a 4.2% increase.
Q: Who is committing this fraud?
A: While employees constitute the largest group of perpetrators, a notable increase was seen in fraud committed by office workers. There was a slight decrease in fraud committed by unemployed individuals,day laborers,full-time homemakers,and students. Notably, fraud among individuals in their 60s and older increased substantially last year.
Q: What should consumers be aware of regarding insurance?
A: An insurance company official advises that consumers need to be notably vigilant, as fraud can involve either being a perpetrator or a victim. They caution that if someone attempts to induce you to use your insurance to something it does not cover, they are inducing you with fraud.
