Insurance holders are less likely to default on their financial borrowings, showed the nation’s first big data analysis by a government institution on Tuesday.
According to the results of an analysis of credit information of around 760 million consumers by Korea Credit Information Services, there is some correlation between insurance subscription and repayment of loans.
Among 18 million borrowers (aged over 20) who took loans from the period between June 2015 and June 2016, those who were holding at least one insurance policy had a 1.4 percent default ratio, compared to 3.8 percent among non-insurance holders.
The more the insurance they held, the steeper the ratio fell, the result showed.
“Insurance subscriptions are an indicator showing one’s economic activities and financial capability,” said Lee Dong-ryeol, an official at KCIS.
The data suggests that insurance holders are more financially stable than those without insurance, and are better preparing for future risks including accidents, diseases and death, according to the report.
“Through the big data analysis, financial institutions can make their credit rating systems more elaborate to guard against possible defaults.”
The KCIS was launched in January under the government’s efforts to boost the use of big data in the financial sector.
Starting Nov. 28, the institution will introduce a new service dubbed “Look Into All of My Insurance” on its website, enabling view details of all insurance products they have been subscribed to. Insurance holders will be able to view all insurance accounts, compare details of each and estimate total insurance payments.
FSC Chairman Yim Jong-yong tries viewing the new KCIS service based on big data at the Seoul government complex in Gwanghwamun, central Seoul, on Tuesday. (FSC)
The service will also suggest extra information about other insurance products that are considered more suitable for individual consumers, based on their financial information analyses. The KCIS hopes that this will help people prepare for retirement.
The results of the first analysis also showed that outstanding loans per head rose from 4.5 million won at age 19 to 67.8 million won at 35, while the average default ratio peaked at 25 to 2.3 percent. Koreans between age 26 and 60 have 80 million won on average in outstanding loans. The default ratio tends to rebound after age 65 from 0.8 percent to 1.3 percent at 84.
Further analysis will be made public on the homepage of the institution, while some purpose-driven analyses will be provided for financial institutions and fintech start-ups in order to help them develop better financial products tailored to consumer needs, the institution said.
By Song Su-hyun (firstname.lastname@example.org