Car Insurance Treatment Compensation Standards Established for First Half of Year... Conditional Capital Securities Issuance Allowed for Insurers

Financial Services Commission's '2021 Work Plan for the Financial Industry Bureau'
Strengthening the Insurance 'Private Safety Net' Function

[Asia Economy Reporter Oh Hyung-gil] The government will establish treatment and compensation standards to address the issue of rising automobile insurance premiums caused by excessive medical treatment. Face-to-face insurance solicitation will be converted to non-face-to-face methods, and non-face-to-face solicitation will be transitioned to digital methods by improving unnecessary regulations.

To prepare for the introduction of the new International Financial Reporting Standard (IFRS17) in 2023, the issuance of contingent capital securities will be permitted within the year, and measures to activate liability adjustment tools such as co-reinsurance and contract transfers will also be reviewed.

According to the '2021 Work Plan of the Financial Industry Bureau' released by the Financial Services Commission on the 3rd, the government will establish automobile insurance treatment and compensation standards in the first half of this year.

The annual leakage amount of excessive medical treatment insurance payments in automobile insurance is about 540 billion KRW, with a burden of about 23,000 KRW per policyholder. Accordingly, treatment and compensation standards will be established by referring to overseas cases.

Treatment standards for minor injuries are expected to be introduced. Previously, the UK has mandated the issuance of medical institution diagnosis certificates for neck, back, and shoulder injuries since 2018 and limits the treatment period based on the diagnosis certificate.

To improve the insurance solicitation order, the sales responsibility of independent insurance agencies (GA) will be strengthened. To encourage voluntary improvement efforts such as reducing incomplete sales, a 'GA internal control evaluation system' will be introduced, providing incentives to excellent GAs. To prevent damage to diligent planners due to GA sanctions, a 'substitute penalty for business suspension' will be introduced.

Additionally, a comprehensive institutional improvement plan, including strengthening the detection and punishment of insurance fraud, will be prepared within the first half of the year. Institutional improvement measures will also be introduced to prevent consumer damage caused by foreign currency insurance, whose sales volume is rapidly increasing, and incomplete sales.

Efforts will also be made to computerize claims for indemnity medical insurance, which has failed legislation for several years.

To strengthen the private safety net of the insurance industry, the government will promote the development of pension insurance, insurance specialized for the elderly, and chronic disease-specific insurance using health data. It will also improve systems to reduce insurance premium burdens for platform workers and develop insurance products to support damages (business interruption losses, contract cancellations, etc.) for small business owners and SMEs affected by natural disasters and infectious diseases.

Regarding healthcare, a 'Insurance Sector Healthcare Activation Task Force (TF)' will be established this month, with broad participation from the insurance industry, healthcare industry, academia, and experts. Various plans for launching and activating products such as health management devices and expanded use of health data will be explored.

In the second half of the year, an 'IFRS17 Regulatory Revision Promotion Team' will be formed to identify necessary items and promote legal amendments.

Furthermore, to strengthen Environmental, Social, and Governance (ESG) management, investments in renewable energy projects will be reflected in management performance evaluations, the use of long-term indicators in executive performance and compensation systems will be enhanced, and the deferral period for performance-based compensation will be extended.

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