The tightening management policies by financial authorities to curb household loan growth are extending beyond banks to the secondary financial sector, further narrowing funding options for citizens. Despite a decline in household loans from the insurance sector, concerns are rising that the management orders from authorities are limiting non-bank funding opportunities for borrowers who find it difficult to access bank loans.
As of the end of the first quarter of this year, the outstanding household loans from life and non-life insurance companies totaled 63.912 trillion won, a 1.8% decrease from 64.2377 trillion won during the same period last year. Compared to three years ago, this figure has shrunk by 2.7%.
The outstanding household loans from life insurance companies amounted to 41.8169 trillion won, reflecting a 0.5% decrease year-on-year. Non-life insurance companies reported 21.2742 trillion won, marking a 4.2% decline, which is a larger drop than that of life insurers.
Although the scale of household loans from insurance companies is decreasing, financial authorities reportedly summoned insurers last month to reinforce management of household loans. In response, insurers are focusing on total loan management and are reducing new loan approvals.
Some insurance companies are adopting even more conservative lending practices. Kyobo Life has reduced its maximum limit for credit loans from 60 million won to 50 million won starting this month, while Samsung Fire & Marine Insurance has halted new applications after reaching its self-imposed limit for mortgage loans.
Major insurers have also reduced the loan limit for insurance contract loans, which previously allowed borrowing up to 90% of the surrender value, by 10 percentage points since April, following directives from financial authorities. Insurance contract loans, which allow policyholders to borrow against their accumulated surrender values without requiring separate credit checks or income verification, have been a key source of emergency funding.
With the barriers to bank loans becoming higher and the limits on insurance contract loans being tightened, there are growing concerns that policyholders in need of urgent funds for medical expenses or living costs may face increased financial burdens. This could also impact the financial planning of policyholders who had based their funding strategies on the previous loan limits.
An industry insider stated, "Insurance contract loans are fundamentally different from general credit loans, as they utilize the surrender values accumulated from premiums paid by consumers. While we understand the government's intention to manage household debt, applying the same restrictions to all loans could ultimately push consumers in need of urgent funds towards high-interest loans."
* This article has been translated by AI.
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