"Switch Before Your Actual Loss Insurance Premium Increases" Surge in Conversion Sales

Starting Next Year's Insurance Premium Increase, Switching Sales Begin
Promoting Lower Surcharge Burden if Subscribed Before 4th Generation Launch
"A Strategic Measure to Manage Rising Actual Loss Ratios"

[Asia Economy Reporter Oh Hyung-gil] "Do you have indemnity insurance? Switch before the premiums go up further."

Insurance companies have rolled up their sleeves for year-end sales to convert indemnity medical insurance. They are actively encouraging customers to switch to the new indemnity insurance before next year's premium hikes and the launch of the 4th generation indemnity insurance. However, there are concerns that for products purchased in the past, which have little or no deductible and higher coverage levels, customers should be cautious about switching products.

According to the insurance industry on the 21st, non-life insurers such as Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, and DB Insurance have begun notifying policyholders whose indemnity insurance will be renewed in January next year that premiums will increase. The premium hike is expected to be around 20%. Insurers are taking advantage of the significant premium increase to actively promote switching sales.

Indemnity insurance is divided into three types depending on the sales period and coverage composition: 'Pre-standardized indemnity' (old indemnity) sold before October 2009, 'Standardized indemnity' sold between October 2009 and March 2017, and 'Good indemnity' (new indemnity) sold after April 2017.

Since this month, insurance companies have been encouraging their telemarketing (TM) and agents to engage in so-called 'conversion activities' to switch pre-standardized indemnity insurance to new indemnity insurance.

For old indemnity and standardized indemnity policyholders, insurers are inducing conversion by applying much simpler procedures than usual products, such as exempting some disclosure obligations. They emphasize that switching to new indemnity insurance means lower premiums and eligibility for no-claims discounts.

Indemnity Loss Ratio Rapidly Increasing, Losses Snowballing

The new indemnity insurance has similar coverage to the old indemnity but includes deductibles of 90% for covered services, 80% for non-covered services, and 70% for special contracts. Because of this, premiums are relatively cheaper. According to the Financial Supervisory Service, for a 40-year-old male, the old indemnity premium is 36,679 KRW per month, while the new indemnity premium is 12,184 KRW, nearly three times less. This results in an annual difference of about 300,000 KRW.

However, the conversion rate to new indemnity insurance has not been high since its introduction. As of the first half of this year, out of 28.39 million indemnity insurance contracts held by non-life insurers, 8.54 million (30%) were old indemnity, 14.3 million (50%) were standardized indemnity, and only 5.14 million (18%) were new indemnity.

In particular, insurers are promoting that subscribing to new indemnity insurance before the launch of the 4th generation indemnity insurance, which applies premium surcharges based on medical service usage, results in less surcharge burden. They explain that for people in their 50s and 60s who frequently visit hospitals, subscribing to new indemnity now means no surcharge for 15 years until the re-subscription period.

Insurance companies describe the indemnity insurance conversion sales as a strategy for managing loss ratios. Currently, the loss ratios for old indemnity and standardized indemnity are rapidly increasing, causing growing losses. As of the end of last year, the loss ratio for old indemnity was 144%, and for standardized indemnity, 135%. This means that for every 1,000 KRW collected in premiums, 1,300 to 1,400 KRW is paid out in claims.

However, it is advised that switching indemnity insurance should be chosen according to one's medical history and financial situation.

An industry official said, "Due to the product structure of indemnity insurance, as age increases, the number of claims rises, causing premiums to increase," adding, "You need to carefully consider whether to endure high premium hikes to maintain existing benefits or reduce coverage limits to relieve premium burdens."

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