A office worker in her 30s, identified as A, who recently had a mammotome procedure to remove a breast tumor, filed a claim with Meritz Fire & Marine 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 the insurer paid for the delayed payout was about 4,000 won, which translated to a mid-3% annual rate.
As more insurers delay paying claims, critics say the low delayed interest rate compared with major countries encourages "slow-walked payouts." The criteria for delayed interest payments have remained unchanged for 10 years. Consumers said, "Considering inflation and financial expense, the delayed interest on insurance payouts should be raised."
◇ Korea's delayed interest rate capped at 12%… Texas at 18%, Spain at 20%
According to the Financial Supervisory Service on the 28th, for personal lines such as life, illness, and accident insurance, claims must be paid within three business days from the date of claim, and for property lines such as fire and liability insurance, within seven days from the date the claim is determined. If this is exceeded, delayed interest is imposed based on the policy loan rate (the interest rate applied when a policyholder borrows money with the surrender value as collateral). If the delay exceeds 30 days, an additional rate is applied. It is 4 percentage points (P) for 31–60 days, 6 P for 61–90 days, and 8 P for more than 90 days. These standards have been in place for 10 years since they were 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 on top of that, the delayed interest insurers pay tops out in the 12% range. By contrast, if an individual is late in repaying a loan, the arrears interest can rise to the legal maximum interest of 20% per year.
Major countries overseas impose punitive levels of interest to prevent insurers from delaying claim payments. In Texas, insurers must notify approval or denial within 30 days of receiving a claim, and if payment is delayed 60 days or more without justifiable reason, an annual 18% interest is imposed. In Spain, if payment is delayed more than two years, an annual 20% interest must be paid. In Taiwan, if payment is not made within 15 days from the date of claim, an annual 10% delayed interest is imposed.
◇ Delayed insurance payouts rising at KDB Life and Shinhan Life
With delayed interest on claim payments lower than in major countries, cases of insurers delaying payouts 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 insurer-paid claims missed the payment deadline. The rate 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.
Looking at companies with high delay rates by sector, among non-life insurers, NongHyup Non-Life Insurance (27.8%) had the highest delay rate, followed by Lina Non-Life (18.8%), Meritz Fire & Marine (18.8%), Lotte Non-Life Insurance (14.5%), and Heungkuk Fire&Marine Insurance (14.5%). Among life insurers, KDB Life (52.9%) was highest, followed by Shinhan Life (52.8%) and iM Life (50%).
Lee Jeong-min, a research fellow at the Korea Financial Consumer Protection Foundation, said, "Because delayed interest on claims is low, insurers do not face a heavy burden even if they delay payment," adding, "Habitual delays can burden consumers, so institutional improvements are needed."