A office worker in her 30s, identified as A, who recently had a breast tumor removed through a Mammotome procedure, filed a claim with Meritz Fire & Marine Insurance for 2.4 million won in surgery costs. The insurer questioned the appropriateness of the surgery and conducted an on-site investigation, and the payout was made about 20 days after the claim. The interest paid by the insurer for the delayed payment was about 4,000 won, which translated to a mid-3% annual rate.
As more insurers delay paying claims, critics say the low delay interest rate compared with major countries encourages "tardy payments." The standard for paying delay interest has remained unchanged for the past 10 years. Consumers say, "Considering inflation and financial expense, delay interest on insurance payouts should be raised."
◇ Korea's maximum delay interest rate is 12%… Texas is 18%, Spain is 20%
According to the Financial Supervisory Service on the 28th, for personal insurance such as life, disease, and accident insurance, claims must be paid within three business days from the date of claim, and for property insurance such as fire and liability insurance, within seven days from the date of decision. If this is exceeded, delay interest is imposed based on the policy loan rate (the rate applied when a policyholder borrows money using the surrender value as collateral). If the delay exceeds 30 days, an additional rate is added. It is 4 percentage points (P) for 31–60 days, 6 P for 61–90 days, and 8 P for more than 90 days. This standard has been in place for 10 years since it was introduced in 2016.
As of May this year, the policy loan rate disclosed by the Korea Insurance Development Institute is 4.15%. Applying the maximum additional rate, the delay interest insurers pay is in the 12% range at most. In contrast, if an individual falls into arrears on loan repayment, the delinquency interest can rise to the legal maximum interest of 20% per year.
Major overseas countries impose punitive levels of interest to prevent insurers from delaying claim payments. In Texas, insurers must notify approval or denial within 30 days of a claim being filed, and if payment is delayed for 60 days or more without justifiable reason, an annual interest rate of 18% is imposed. In Spain, if claim payment is delayed for two years or more, an annual interest rate of 20% must be paid. In Taiwan, if payment is not made within 15 days from the date of claim, an annual delay interest rate of 10% is imposed.
◇ Delays in claim payments rise at KDB Life, Shinhan Life and others
With delay interest on claim payments lower than in major countries, cases of insurers delaying payments are increasing. According to data submitted by People Power Party lawmaker Lee Yang-soo from the Financial Supervisory Service (FSS), in the first half of last year, 9.3% of the insurance payouts made by insurers missed the payment deadline. This share has risen each year, from 6.8% in 2020 to 8.1% in 2021, 8.4% in 2022, 8.3% in 2023, and 8.6% in 2024.
By sector, among non-life insurers, NongHyup Property & Casualty Insurance had the highest delay rate at 27.8%, followed by Lina Non-Life at 18.8%, Meritz Fire & Marine at 18.8%, Lotte Non-Life Insurance at 14.5%, and Heungkuk Fire&Marine Insurance at 14.5%. Among life insurers, KDB Life was highest at 52.9%, followed by Shinhan Life at 52.8% and iM Life at 50%.
Lee Jeong-min, a research fellow at the Korea Financial Consumer Protection Foundation, said, "Because delay interest on claim payments is low, insurers do not face heavy burdens even if they pay late. This structure is making tardy payments customary," adding, "We need to improve the system to reduce the burden on consumers."