South Korean insurers are expected to freeze premiums for the year in line with the government's moves to lessen burdens on ordinary citizens, market watchers said Tuesday.
Local insurance companies, including Samsung Life Insurance Co., Samsung Fire & Marine Insurance Co., and Hyundai Marine & Fire Insurance Co., are planning to freeze their premiums in April, they said.
Market watchers earlier anticipated insurance premiums to increase around 3 percent as the Financial Supervisory Service, the country's financial watchdog, may cut the so-called standard rate of interest next month to 3.5 percent from the current 3.75 percent.
The standard rate of interest refers to the estimated return on insurers' asset management, or investment yield on their mandatory reserve deposits.
A fall in the standard interest rate causes local insurers to expand their reserve deposits to beef up investment returns, usually by raising insurance premiums.
South Korean insurers' moves came as President Park Geun-hye, who took office last month, has pledged that her government will step up efforts to minimize price hikes to support the livelihoods of the public.
"The country's financial authorities have convened corporate executives to request a price freeze," an official from a life insurer said.
"The government has verbally requested insurers to hold the premiums, which sounded alarm bells for the firms which planned to raise the premiums in pace with consumer prices," said another official from a non-life insurer.
Meanwhile, South Korea's credit card companies are also shifting into emergency mode as the government requested to cut their rates on installment purchases, revolving loans and cash advances.
Revolving credit refers to the repayment of money borrowed from a credit card company such as cash advances through rolling over the monthly balance to the following month until it is fully paid off.
Market watchers said the cut in commission rates last year has already dealt a harsh blow to local credit card firms by having an adverse impact on their profitability.
The reduction in commission rates last year came as credit card firms received sharp criticism for charging far higher fees to smaller merchants than large retailers, thus pocketing excessive income.