Life and non-life insurers launch 14 billion won program across 7 regions

About 1 million small-business owners to benefit; coverage for elderly living alone also planned

The Financial Services Commission office at Government Complex Seoul in Jongno-gu, Seoul [Yonhap]
The Financial Services Commission office at Government Complex Seoul in Jongno-gu, Seoul [Yonhap]

A free "mutual-aid insurance" program for small-business owners that the insurance industry has been developing since last year is now formally under way. After building a 30 billion won ($21.8 million) mutual-aid fund, insurers worked through a regional government application process and product design phase to roll out coverage in seven areas — protecting against risks ranging from illness and fire to business closures, heatwaves and phishing scams.

The Financial Services Commission announced Tuesday that life and non-life insurers will run the mutual-aid insurance program in partnership with seven local governments — South Gyeongsang Province, North Gyeongsang Province, Gwangju, South Jeolla Province, North Jeolla Province, Jeju and North Chungcheong Province — at a combined scale of 14 billion won. About 1 million small-business owners are expected to benefit.

The insurance industry established the mutual-aid fund last August, with the life insurance and non-life insurance sectors each contributing 15 billion won for a combined total of 30 billion won. Insurers then solicited applications from local governments nationwide and developed products tailored to regional needs. The seven local government programs now launching total 14 billion won.

On the life insurance side, six of the seven regions — all except North Jeolla Province — will offer credit life insurance. The product pays off a small-business owner's outstanding loan if the owner dies or is diagnosed with cancer, cerebral hemorrhage, acute myocardial infarction or other covered illnesses. Specific terms vary by region, but coverage reaches up to 10 million won in the event of death or a diagnosis of one of the three major illnesses.

Policyholders will also receive financial benefits. Small-business owners who take out a loan covered by the mutual-aid credit life insurance through Industrial Bank of Korea can receive an additional interest rate discount of up to 0.3 percentage points on top of existing preferential rates. Those who take out a new Haetsal Loan through the Korea Inclusive Finance Agency will also see their first-year guarantee fee rate reduced by 0.3 percentage points.

Image created using Gemini.
Image created using Gemini.

Non-life insurance products are tailored to each region's characteristics. In North Gyeongsang Province, business owners hospitalized due to illness or injury who must suspend operations can receive up to 50,000 won per day toward fixed costs such as monthly rent and utility bills. In North Chungcheong Province, victims of cybercrime — including phishing and smishing — can be compensated up to 3 million won.

Jeju has been running a climate insurance product since July that compensates daily workers for lost income when extreme heat alerts force public construction sites to halt. If an extreme heat alert is issued before 1 p.m. and work stops, the payout is calculated based on the hours lost and the standard hourly wage.

Index-based insurance — which uses weather data itself as the trigger for payouts — is also gaining traction in the industry. KB Insurance sells a weather insurance product for traditional market vendors that compensates for business losses when meteorological indicators such as rainfall and high and low temperatures meet certain thresholds.

With the exception of North Jeolla Province's flood damage insurance, non-life insurance products enroll eligible owners automatically without a separate application. However, policyholders must file claims themselves with supporting documents if an incident occurs.

The FSC plans to use the remaining 17.4 billion won in the mutual-aid fund to identify additional underserved groups — such as elderly people living alone and other older populations — who have had relatively limited access to insurance benefits. The commission is also pursuing plans to provide non-financial support alongside free insurance, including health management services and medication guidance.


rim@heraldcorp.com