Gov’t persuades insurers not to raise premiums

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Gov’t persuades insurers not to raise premiums

Insurance companies that were poised to raise premiums starting next month are expected to freeze them this year, bowing to government pressure to give households a break, industry insiders said yesterday.

Analysts expected companies including Samsung Life Insurance, Hanwha Life Insurance, Samsung Fire and Marine Insurance and Hyundai Marine and Fire Insurance to raise premiums up to 10 percent for whole life insurance policies signed from April.

The Financial Supervisory Service is expected to cut the standard rate of interest by a quarter percentage point starting from April from the current 3.75 percent to 3.5 percent.

That will reduce the yields on insurers’ mandatory reserve deposits.

The financial watchdog established the standard rate of interest to curb excess competition and help maintain insurers’ fiscal soundness. It said existing insurance policies would not be affected.

The FSS renews the standard rate of interest every April when the new fiscal year starts for insurers after considering market rates and the yield on 10-year Treasuries.

The yield of 10-year Treasuries fell to 2.94 percent in February from 3.82 percent in February 2012 and 4.67 percent in February 2011.

If the standard rate of interest goes down by 0.25 percentage point, analysts estimate premiums will rise between 5 percent and 10 percent for whole life policies and 2 percent to 3 percent for term policies.

The FSS said it will take stern measures against insurers if they recklessly inflate insurance premiums.

“Previously, the financial watchdog sought our cooperation in terms of handling insurance premium hikes,” said an industry source who asked not to be named. “But it recently called in executives of insurance companies and reiterated the importance of freezing insurance premiums. If we defy the government’s request we fear a possible backlash. We have no other option but to keep insurance premiums unchanged.”

Last week, the FSS asked insurers to finalize the level of insurance premium hikes as soon as possible and promised to examine them to see whether they were appropriate.

Kim Soo-bong, deputy FSS governor, told reporters, “They cannot raise insurance fees if they fail to provide clear reasons to us why the hike is absolutely necessary.”

Auto insurers were forced to slash insurance premiums by an average 2.5 percent last year ahead of the April general election.

By Kim Mi-ju []
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