Mortgage loans are as essential as air and water for low- and middle-income families. For a country striving to reduce air pollution, supporting home ownership through mortgage policy should remain a top priority. However, in recent years, the mortgage system has become entangled in bureaucracy, delays at commercial banks, and what many view as punitive processes—stripping the policy of its original intent and becoming a major source of stress and frustration for citizens.
For those already burdened by the complicated process of applying for a mortgage, yet another challenge has emerged: a new regulation introducing long-term life insurance requirements. Beginning next month, borrowers will not only have to pay for property insurance and collateral-related coverage but also for a substantial new insurance premium.
Officials have stated that the insurance rate will vary depending on the loan amount, repayment period, borrower’s age, and overall health condition. However, in practice, this explanation seems inconsistent. To put it bluntly, unless a borrower dies during the repayment period—at which point their surviving family might benefit—this new insurance burden is being seen by many as little more than legalized extortion.
Currently, over 115,000 households in Mongolia are paying off mortgage loans. Yet most of them, along with prospective new borrowers, are unaware of the exact terms of the new insurance policy or how much they will be required to pay. Vague information circulating on social media has fueled concerns, with some reports claiming borrowers may have to pay an additional 25 to 30 million MNT under the new policy.
In response, the Financial Regulatory Commission (FRC) issued a statement regarding the revised regulation, emphasizing that its core mission is to protect the rights of consumers and policyholders. According to the FRC, under the previous regulation, borrowers could choose between two types of insurance—accidental death or long-term life insurance. Most people opted for the cheaper option: accidental insurance. However, this often failed to provide real protection. A study shows that eight out of 10 borrowers who lose their ability to work or pass away do so from causes unrelated to accidents, meaning their insurance offered little to no benefit.
To address this gap and provide realistic protection based on actual risk, FRC has decided to implement a new insurance system in line with international standards. The new policy offers coverage for a wide range of risks that may occur throughout a person’s life—not just sudden accidents, but also long-term health issues and other serious conditions. As a result, anyone taking out a mortgage going forward will be required to purchase long-term life and health insurance. Existing mortgage holders will also have to comply with the new regulation when they renew or extend their loan agreements.
Moreover, FRC has announced that the new regulation has been included in the first annex of the Insurance Regulation, titled “Requirements and Indicators for the Operations of Insurers and Insurance Professionals”. Under this change, mortgage borrowers will be required to obtain standard property insurance for their collateral and, additionally, long-term life and health insurance from companies that offer such products.
Specifically, under the mortgage-related rules, borrowers are already obligated to maintain both property and life insurance coverage for the duration of their loan term. The new policy replaces short-term accidental insurance with long-term life and health coverage, while keeping the rest of the framework intact.
According to the FRC, there are currently 16 registered insurance companies in Mongolia that provide collateral insurance for mortgage loans. Of these, seven companies disbursed around 931 million MNT in claims for 470 insurance policies in the past year. In comparison, compensation under just 27 accidental insurance policies totaled 1.1 billion MNT. Despite this, disputes and complaints about claim settlements—especially those related to health insurance—remain frequent and unresolved.
This is one of the reasons officials are pushing to enroll borrowers in long-term insurance plans that offer five to six times greater protection than existing policies. The advantage of this new system is clear: it provides coverage not just for accidents but also for critical illnesses such as stroke and cancer, which are among the leading causes of death in Mongolia. However, for borrowers who used to pay around 100,000 MNT annually for accident insurance, the significantly higher premiums for long-term coverage will impose a serious financial burden.
FRC, however, defends the change, arguing that the increased premiums are justified by the expanded protection and are consistent with market principles. Unlike before—when companies could freely set their own premiums for accident and property insurance—long-term insurance rates will now be based on expert actuarial calculations and may vary accordingly.
Yet, the new regulation reveals a concerning reality: only two companies in Mongolia currently hold FRC-issued licenses to offer long-term life insurance products. This means that all existing and future mortgage borrowers—numbering over 100,000—will be funneled into purchasing long-term life and health insurance from just these two companies. Understandably, many citizens are deeply dissatisfied with this arrangement. Critics argue that FRC is relying on limited data to justify sweeping changes. The commission has claimed that eight out of 10 mortgage borrowers die from causes unrelated to accidents. But this statistical generalization has drawn skepticism, with some alleging that FRC is catering to the interests of the two licensed insurers, essentially turning mortgage borrowers into lifelong customers—if not captives—of these companies.
Taking the FRC’s logic at face value, if eight out of every 10 mortgage holders die from illness rather than accidents, then roughly 92,000 of Mongolia’s 115,000 mortgage borrowers are expected to die from disease or cancer. Such an assertion not only seems alarmist but also raises ethical questions about the motivation behind the regulation. Surveys show that 25 to 45-year-olds, the age group least likely to suffer from severe illness or death, make up around 85 percent of all mortgage holders. These are the economically active and relatively healthy segments of the population. Forcing them to purchase long-term insurance coverage en masse raises concerns about the true purpose of the regulation. Many suspect that it is merely a scheme to enrich the insurance sector—particularly the two favored providers.
Mongolia’s insurance system, critics argue, has long been designed to “milk” citizens rather than protect them. Mortgage-related insurance is no exception. For instance, a 30-year-old borrower like Dorj may pay insurance premiums for life, health, and collateral coverage until he is 50. If he remains healthy and pays off his loan like everyone else, he essentially receives nothing in return—unless he falls seriously ill or dies along the way.
Despite contributing millions in premiums over the course of their mortgage, borrowers under this system may never see a single tugrug returned. This stark reality underscores the punitive nature of Mongolia’s non-accumulative insurance model—one that demands payment without offering tangible financial returns. Under the current rates, long-term life insurance premiums range from 0.2 to 0.5 percent annually. For a borrower with a 100 million MNT loan, this translates to an annual premium of approximately 300,000 to 500,000 MNT. Over the life of the loan, borrowers may end up paying an additional six to 10 million MNT in premiums alone—without any guarantee of benefit unless they fall seriously ill or die.
FRC further defends this move by claiming that the policy is aligned with international standards. Yet, reality tells a different story. In many countries, mortgage insurance serves to protect the banking system from default risk—not to impose financial strain on borrowers. Long-term life insurance is rarely mandatory. In some jurisdictions, the state or the lending bank shoulders the insurance costs to ease the burden on borrowers. Moreover, where such insurance products are offered abroad, they are typically designed to be borrower-friendly: premiums are integrated into monthly repayments, options are flexible, and policies often come with a savings component. These accumulative, choice-driven models are built to protect—not exploit—the insured. They represent stable, legally codified systems that balance risk mitigation with financial sustainability.
In stark contrast, Mongolia’s current system requires all mortgage borrowers to purchase both property and long-term life insurance, regardless of individual need or preference. The premiums are high, the policies non-accumulative, and the participation mandatory. There are no opt-outs, no alternatives—just a rigid, one-size-fits-all approach that resembles an outdated, socialist-era mechanism rather than a modern, consumer-focused insurance framework. For many, this policy shift feels less like protection and more like coercion, prompting growing concern that the system serves the interests of insurers far more than those of ordinary citizens.

Published Date:2025-07-25