[Become an Insurance Insider] The 'Half-Price' Real Expense Insurance Coming Next Year

"Fundamental Improvement of Indemnity Health Insurance Product Structure"
Only 'Non-Covered' with Differential and Selective Medical Characteristics Applied

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[Asia Economy Reporter Oh Hyung-gil] The financial authorities' reform plan for the structure of indemnity medical insurance products to be released this month can be summarized in one word: 'half-price premiums.' It is expected to result in a reduction effect of about 40-50% compared to the existing standardized indemnity insurance.

According to the Financial Services Commission and the insurance industry on the 1st, the financial authorities explained that some indemnity insurance subscribers excessively use medical services, leading to high loss ratios, which in turn causes premium increases and creates fairness issues among subscribers who use fewer medical services.

The Korea Insurance Research Institute previously announced improvement plans at a public hearing on indemnity medical insurance system improvements, including premium surcharges linked to the usage volume of non-reimbursable medical items, increased deductibles, increased outpatient medical expense deductibles, lowered annual coverage limits, and separation of non-reimbursable medical special contracts.

They unveiled a '4th generation' indemnity medical insurance (indemnity insurance) product plan, which focuses on significantly increasing premiums up to three times the following year based on the amount of insurance claims.

Jeong Seong-hee, a research fellow at the Korea Insurance Research Institute, said, "The non-reimbursable claims performance of indemnity subscribers should be evaluated annually to determine discount and surcharge levels (application rates), which should then be reflected in the renewal premiums for the following year."

He added, "They should be classified into discount (no claims), surcharge (small surcharge, high surcharge), and non-application (small claims, exempt subjects). Most will be eligible for discounts," and emphasized, "To discourage unnecessary medical use, high surcharges should be applied to some high-claimants," and "Exempt subjects should be determined so that the medical accessibility of indemnity subscribers is not restricted."

In response, the Financial Services Commission expects that while the 4th generation indemnity insurance will increase premiums for some subscribers, it will provide premium discount benefits to the majority of subscribers.

The premium reduction rate of the 4th generation indemnity insurance is expected to be about 40-50% compared to 'standardized indemnity' (sold from October 2009 to March 2017) and about 10% compared to 'Good Indemnity' (sold after April 2017).

However, the insurance premium differentiation system is expected to apply only to 'non-reimbursable' medical services, which are non-essential and elective, rather than 'reimbursable' services for essential treatment purposes.

The Financial Services Commission explained, "While subscribers subject to surcharge grades due to non-reimbursable usage are only a portion of all subscribers, most are accident-free (discount grade), so the majority of subscribers will benefit from premium discounts."

The insurance industry expects a reduction in loss ratios with the 4th generation indemnity insurance but insists that detailed incentives should be prepared to encourage existing indemnity subscribers to switch.

An insurance industry official pointed out, "People who use medical services less may be willing to switch to the new indemnity insurance, but considering that medical use increases with age, they may choose not to switch."

This content was produced with the assistance of AI translation services.