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Legal Policy Tasks for Revitalizing Credit Insurance

  • Legal Theory & Practice Review
  • Abbr : LTPR
  • 2023, 11(2), pp.261-294
  • Publisher : The Korea Society for Legal Theory and Practice Inc.
  • Research Area : Social Science > Law
  • Received : May 9, 2023
  • Accepted : May 29, 2022
  • Published : May 31, 2023

Youngkook Kim 1

1국회입법조사처

Accredited

ABSTRACT

In the recent high-interest financial market situation, the effectiveness of credit insurance is being re-examined as the risk of debtor default increases. Credit insurance is a product that repays loans with insurance money in the event of an insurance accident, such as the death of a debtor, and is useful in resolving the risk of default. In particular, insurance guarantees the risk of outstanding loans, making it easy to induce debtors to cut loan rates and lower credit risks for lenders such as banks. However, credit insurance has a low subscription rate due to unfavorable loan and insurance sales channels and problems with binding contracts such as breaking and bundling. Major foreign countries such as Japan and France need to consider ways to utilize credit insurance as they are virtually mandatory to sell credit insurance when lending housing and are faithful to the role of a "social safety net." In order to revitalize credit insurance, it is first necessary to seek appropriate utilization measures such as revising the insurance industry and financial consumer protection laws and improving the system. According to the supervisory regulations on the protection of financial consumers, it is necessary to stipulate as an exception to the prohibition of unfair trade practices, and to guide and explain credit insurance products at the loan window. System improvements should be made so that debtors can guide them in the form of collective credit insurance and faithfully explain the main contents of the product. To improve the utilization of credit insurance by financial institutions, it is also necessary to lower loan risk weights, ease the application of LTV, and simplify procedures such as lowering loan interest rates and credit recovery. By expanding sales through financial platforms and cross-selling between insurance companies, appropriate regulatory improvement measures such as improving debtors' access to credit products and protecting debtors should be sought.

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