No Windfall from COVID-19... High Loss Ratio Continues in Real-World Insurance

Continuous Losses from 2016 Through the First Quarter of This Year

[Asia Economy Reporter Oh Hyung-gil] The indemnity health insurance, which has 38 million subscribers nationwide, did not benefit from the COVID-19 rebound effect. Despite pushing through premium hikes to reduce the increased loss ratio, a significant deficit has still occurred this year.

With the launch of the 4th generation indemnity insurance scheduled for July, insurance companies are deeply concerned as there is no clear way to resolve the existing deficit structure of indemnity insurance, such as excessive medical service use by some subscribers.

According to the Financial Supervisory Service and the insurance industry on the 29th, indemnity insurance has recorded continuous losses from 2016 through the first quarter of this year.

The personal indemnity insurance loss amount for the first quarter of this year among 13 non-life insurers holding indemnity insurance was calculated at 686.6 billion KRW, a level similar to 689.1 billion KRW in the first quarter of last year when the impact of COVID-19 was minimal.

This is quite different from automobile insurance, where the loss ratio improved due to reduced medical use amid the COVID-19 aftermath.

The risk loss ratio, which is the ratio of insurance claim payments to risk premiums for indemnity insurance in the first quarter, recorded 132.6%.

On the other hand, the automobile insurance loss ratio remains at an appropriate level. The automobile insurance loss ratios in April for the four major domestic non-life insurers?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance?remained between 79.3% and 80.5%, about 3% higher than in March.

The insurance industry explained that automobile insurance reflects a combination of seasonal and timing factors in spring and the reduced vehicle usage.

In contrast, indemnity insurance revealed that medical use concentrated among some subscribers has not decreased significantly.

As of last year, out of the total insurance claims paid of 11 trillion KRW, covered expenses with co-payments amounted to 4 trillion KRW, while non-covered expenses reached 7 trillion KRW. In particular, the first-generation products with low co-payments had a non-covered expense ratio of 64%, whereas the indemnity insurance for elderly individuals with pre-existing conditions and higher co-payments was only 46%.

These non-covered treatments are concentrated in certain items such as manual therapy and cataract treatment.

Non-life insurers are expected to proceed with additional indemnity insurance premium increases. At recent first-quarter earnings presentation investor relations (IR) meetings, insurers including Samsung Fire & Marine Insurance announced that indemnity insurance premiums will be raised next year at levels similar to this year.

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