Six local governments in South Korea, including Gyeongsangnam-do, are scheduled to launch Mutual Growth Insurance totalling KRW 2 billion in the third quarter of this year. Under the program, all participating jurisdictions will offer credit life insurance that uses policy benefits to repay outstanding loans if the insured dies or is diagnosed with a covered illness. Each local authority will provide one life product and one general insurance product, with the life component set up as credit-linked protection for small business borrowers and other vulnerable policyholders.
On March 16, Financial Services Commission (FSC) chairman Lee Okwon attended a signing ceremony with six local governments selected to operate Mutual Growth Insurance schemes from the third quarter of 2026. “The insurance industry has long served as a reliable pillar, filling the welfare gaps left by national and public insurance systems and supporting the livelihoods of citizens. However, it is also true that insurance has not provided sufficient coverage for vulnerable groups who are more exposed to severe financial shocks in the event of unexpected incidents such as illness or injury,” Lee said, as reported by The Asia Business Daily.
The Mutual Growth Insurance initiative draws on a KRW 30 billion Mutual Growth Fund established by the insurance sector in August last year to support free or subsidised cover for small business owners and other vulnerable policyholders. A nationwide call for proposals in November led to the selection of six participating jurisdictions: Gyeongsangnam-do, Gyeongsangbuk-do, Gwangju, Jeollanam-do, Jeju, and Chungcheongbuk-do. Lee described the scheme as a way to narrow identified protection gaps. “This Mutual Growth Insurance program is highly significant in narrowing the insurance protection gap for the vulnerable. Particularly, since the insurance demand was identified through voluntary public calls from local governments, the insurance products provided will be optimally tailored to the needs and circumstances of local small business owners,” Lee said.
Each of the six local governments will sponsor one life insurance product and one general insurance product, with a combined coverage capacity of KRW 2 billion per jurisdiction. About KRW 1.8 billion will come from the sector’s Mutual Growth Fund and KRW 200 million from local government budgets. For life business, all participating regions plan to offer credit life insurance that repays outstanding loans when the insured experiences specified events such as death, cancer, cerebral haemorrhage, acute myocardial infarction, or other covered illnesses. Financial institutions are expected to link these policies to preferential loan interest rates and to apply a reduced guarantee rate on Sunshine Loans, with the lower rate on new guarantees limited to the first year.
General insurance products will vary by region, reflecting local exposures. Examples include climate-related cover for construction sites in Jeju that compensates daily workers for income loss when work is halted due to heatwaves; cyber insurance in Chungcheongbuk-do that responds to direct transaction fraud losses for small businesses; and fire liability cover in Gyeongsangnam-do for small restaurants. Eligibility criteria and detailed coverage terms will be set by a joint working group of insurers and local governments. The industry has indicated that the remaining Mutual Growth Fund balance, estimated at around KRW 17.4 billion, will be used to add more local governments to the program and extend the product line-up, including dementia insurance.
At the same event, the insurance sector presented a five-year inclusive finance plan targeting KRW 2 trillion in support. The plan focuses on free or subsidised insurance, measures to ease premium and interest burdens, and social contribution programmes. The Mutual Growth Fund will support free enrolment in the new products, while the Korea Inclusive Finance Agency will expand zero-premium offerings for vulnerable groups. Existing covers that provide cancer diagnosis benefits and accident or illness protection for children and guardians in single-parent families will be revised to add third-party liability when children cause harm to others and additional benefits for sequelae such as burns or scars.
From April 1, several product and servicing changes are scheduled. Children’s insurance will include time-limited premium discounts during parental or maternity leave. In motor, insurers will recognise military driver experience in private auto rating, introduce hourly motorcycle insurance for delivery workers, and adjust discounted-premium structures for substitute drivers with accident histories. To support policy retention during income disruption, premium payment deferment will be available for policyholders on parental or maternity leave from April 1. For service members with indemnity insurance, a suspension option will allow cover and premium obligations to be paused during military service.
Insurers will also change the treatment of loans secured by policies. Interest payments on policy loans will be deferred during parental or maternity leave starting April 1, and preferential interest rates will be introduced for policyholders aged 65 and older. “Please actively promote effective burden reduction measures and diverse social contribution initiatives that people can truly feel in their daily lives,” Lee said, adding that “the government will also actively support the insurance sector so that inclusive finance can take root in the field.”
In a separate development, the government is introducing measures for SMEs with exposure to Middle East markets, where recent conflict has affected energy, marine, and trade credit risks. The Ministry of Trade, Industry, and Resources (MOTIR) has announced emergency export vouchers for SMEs with business in Middle Eastern markets. Administered by the Korea Trade-Investment Promotion Agency (KOTRA), the vouchers are intended to help offset incremental costs such as return shipping and higher war-risk surcharges on cargo and vessels.
KOTRA will also provide marketing assistance to help exporters identify buyers in alternative markets if they reroute shipments or temporarily halt sales into higher-risk jurisdictions. Korea Trade Insurance plans a separate emergency financial aid package for SMEs exporting to economies around the Strait of Hormuz, including the United Arab Emirates, Saudi Arabia, Iraq, Qatar, and Iran. MOTIR has said it will coordinate with other agencies to “minimise risks for Korean companies” if the crisis continues and access to certain markets remains constrained.
