SEOUL, Sept. 25 (Korea Bizwire) — Insurance policy-backed loans grew more than 20 percent over the past three years, data showed Wednesday, indicating that more people took out loans despite the risk of canceling insurance schemes before maturity amid a slowing economy.
According to the data compiled by the Financial Supervisory Service, insurers’ outstanding policy loans totaled 63.9 trillion won (US$53.4 billion) in 2018, up 21.2 percent from three years ago.
Compared with 2017 and 2016, outstanding policy loans grew 8.8 percent and 6.3 percent, respectively.
A rise in insurance policy loans is typically seen as a sign that more people are feeling the pinch of a slowing economy, as policy loans make it easier to borrow money.
However, borrowers will be forced to cancel their insurance schemes if they fail to make interest payments.
South Korea’s economy expanded 2.7 percent in 2018, down from a solid 3.1 percent the previous year.
In July, South Korea cut its economic growth outlook for this year to between 2.4 percent and 2.5 percent from its previous forecast of between 2.6 percent and 2.7 percent, citing weak exports and sluggish investment.
But many private think tanks forecast that Asia’s fourth-largest economy would grow at a weaker-than-expected clip amid the protracted trade row between the United States and China, which are South Korea’s two largest trading partners.