[Becoming an Insurance Insider] Why Has Silseun Insurance Been Running a Deficit for 5 Years?

FSS Strengthens Oversight on Excessive Medical Use
Aggregates and Manages Non-Covered Insurance Claim Statistics

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[Asia Economy Reporter Oh Hyung-gil] The indemnity medical insurance, which 35 million people have subscribed to and is called the 'second national insurance,' has been struggling with deficits for five consecutive years.

The 4th generation indemnity insurance, where premiums are surcharged or discounted based on the number of claims, is set to be launched this July, but losses from existing insurance continue year after year.

The financial authorities have decided to strengthen the review of insurance payments for non-reimbursable items in indemnity medical insurance, such as manual therapy and cataract treatment.

The Financial Supervisory Service recently announced that it will establish reasonable coverage standards by referring to decisions from the Dispute Mediation Committee and precedents regarding non-reimbursable items that cause insurance payment leakage due to excessive medical use.

They plan to systematically organize statistics on non-reimbursable medical expenses, analyze them regularly, and share any abnormal signs with related authorities.

Indemnity insurance is a 'national insurance' with 34.96 million subscribers as of the end of last year, an increase of 540,000 (1.6%) compared to the previous year.

Depending on the sales period, it is divided into old indemnity (1st generation), standardized (2nd generation), and new indemnity (3rd generation), with standardized indemnity being the most common at 18.77 million cases (53.7%), followed by old indemnity at 8.54 million cases (24.4%) and new indemnity at 7.09 million cases (20.3%).

Premium income reached 10.5 trillion KRW last year, a 6.8% increase from the previous year due to increased new subscriptions and premium hikes. However, the incurred loss amount rose by 7.0% to 11.8 trillion KRW, resulting in a deficit.

Last year, indemnity insurance incurred a loss of about 2.5 trillion KRW, marking five consecutive years of losses. The combined ratio, which is the sum of the loss ratio and expense ratio, reached 123.7%. If the combined ratio exceeds 100%, the insurer incurs a loss.

In particular, the old indemnity product, which has no deductible and suffers from significant insurance payment leakage due to excessive non-reimbursable treatments, had the highest combined ratio at 136.2%.

Improvement of Indemnity Insurance Coverage Standards... Targeting the Rapidly Increasing Non-Reimbursable Items

Most losses occur in non-reimbursable items. Last year, indemnity insurance paid a total of 11.1 trillion KRW in insurance claims, of which 4 trillion KRW was for reimbursable (out-of-pocket) expenses and 7.1 trillion KRW for non-reimbursable expenses.

The proportion of non-reimbursable expenses in indemnity insurance payments was 63.7%, significantly higher than the 45.0% non-reimbursable proportion among National Health Insurance subscribers.

Among the top diseases by claim amount were musculoskeletal disorders (herniated discs, back pain, shoulder lesions) and ophthalmic diseases (cataract diseases). Major treatment items included manual therapy, extracorporeal shock wave therapy, MRI, proliferative therapy, adjustable intraocular lenses, ultrasound head and neck scans, and ocular measurement tests.

The financial authorities are concerned about the sustainability of indemnity insurance as the combined ratio exceeds an appropriate level. They cited the lack of control mechanisms for excessive medical care and moral hazard among certain groups regarding non-reimbursable treatments as causes.

Additionally, it is judged that insurers are selling fixed-amount insurance that covers excessive diagnostic fees, daily allowances, and surgery costs even for minor illnesses or accidents, covering medical expenses with indemnity insurance and realizing excess profits through fixed insurance benefits.

A financial authority official explained, "We plan to prepare a compensation practical casebook and revise the standard terms and conditions of indemnity insurance to establish reasonable coverage standards for non-reimbursable items," adding, "We will also guide insurers to strengthen internal controls when selling fixed-amount insurance products."

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