From July, Introduction of 4th Generation Actual Loss Insurance... Financial Supervisory Service Announces Revision of Standard Terms

Non-covered Medical Services Separated by Special Agreement
Insurance Premiums Differentiated Based on Medical Usage
Co-payment Rates Increased to 20% for Covered, 30% for Non-covered Services

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[Asia Economy Reporter Ki Ha-young] Starting from July, the 4th generation indemnity health insurance will be introduced, which separates non-reimbursed medical treatments into special contracts and increases premiums based on the amount of insurance benefits received.

The Financial Supervisory Service (FSS) announced on the 30th a preliminary notice of the "Standard Terms and Conditions (Insurance Business Supervision Rules) Revision for Restructuring Indemnity Insurance Products and Reflecting the Financial Consumer Protection Act," which includes these details.

The main revision regarding the introduction of the 4th generation indemnity insurance is the separation of indemnity insurance product structure into reimbursed (main contract) and non-reimbursed (special contract) parts. Coverage is expanded for essential reimbursed treatments (main contract), while premiums for non-reimbursed treatments (special contract), which are optional for patients, will be discounted or surcharged based on medical usage.

For the reimbursed part, coverage for infertility-related diseases such as habitual miscarriage, infertility, and complications related to artificial insemination will be expanded. However, to prevent adverse selection, coverage will begin two years after the insurance subscription date. Additionally, if insured during pregnancy, coverage will be expanded for congenital brain diseases of the newborn and skin diseases such as acne when treatment necessity is recognized.

For the non-reimbursed part, premium differentiation will be applied based on medical usage. Premiums will be discounted or surcharged in five stages according to the amount of medical usage, with a maximum surcharge of up to 300% compared to the "standard premium" (the premium calculated for the current year based on loss ratio) for high medical usage. Discounts and surcharges will be applied starting three years after the launch of the new product to ensure sufficient statistical data.

However, medically vulnerable groups requiring continuous treatment will be exempt from premium surcharges. This includes those eligible for special calculation under the National Health Insurance Act such as cancer patients, heart disease patients, and patients with rare and intractable diseases, as well as long-term care recipients under the Long-term Care Insurance Act who are rated 1 or 2 for dementia or cerebrovascular diseases.

Coverage for non-reimbursed items with significant insurance claim leakage, such as manual therapy and non-reimbursed injections, will also be rationalized. Manual therapy will be additionally covered up to 50 times annually only if pathological relief effects are confirmed every 10 sessions. For non-reimbursed injections, coverage will be provided only if administered according to the approval or notification requirements for each drug under the Pharmaceutical Affairs Act, such as vitamins and nutritional supplements.

The deductible rate for the 4th generation indemnity insurance will increase. The reimbursed part will rise from the current 10% to 20%, and the non-reimbursed part from 20% to 30%. However, the premium burden will be eased compared to existing indemnity insurance. The FSS predicts that premiums for the 4th generation indemnity insurance will be about 10% lower than the 3rd generation indemnity insurance (launched in April 2017), about 50% lower than the 2nd generation indemnity insurance (October 2009 to March 2017), and about 70% lower than the 1st generation indemnity insurance.

Existing policyholders who wish to switch to the 4th generation indemnity insurance will be able to do so easily under a no-underwriting principle. After switching, the contract cancellation withdrawal period, during which one can revert to the previous product, will be extended from the current 15 days to 6 months. The re-subscription period for indemnity insurance will be shortened from 15 years to 5 years.

Additionally, non-reimbursed procedures for cosmetic improvement purposes, such as double jaw surgery, which have caused frequent complaints and disputes due to unclear terms, will be explicitly excluded in the terms and conditions. Also, the option to convert from group indemnity insurance to individual indemnity insurance, previously available only to employees, will be expanded to include their families.

Meanwhile, revisions to laws such as the Financial Consumer Protection Act will also be reflected in this standard terms and conditions. Changes in consumer rights and obligations under the Financial Consumer Protection Act, which came into effect on March 25, will be incorporated, and conditions for contract termination due to significant reasons will be strengthened to prevent complaints and disputes.

The FSS will post the preliminary notice of the Insurance Business Supervision Rules revision on its website until the 17th of next month, review opinions received during the notice period, and finalize and implement the revision. The scheduled implementation date is July 1. However, since revisions related to the Financial Consumer Protection Act require changes to all products, insurance companies will have a preparation period, and products reflecting these changes are expected to be launched after August.

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