KIDI: "Excessive Treatment and Medical Shopping Cause Moral Hazard in Insurance"

KIDI Insurance Future Forum Discusses Measures to Resolve 'Moral Hazard'

[Asia Economy Reporter Ki Ha-young] Concerns have been raised that moral hazard, such as overtreatment and excessive medical shopping, could worsen insurance company management and cause significant harm to insurance consumers.

On the 18th, Jeong Won-seok, a research fellow at the Korea Insurance Research Institute, pointed out at the '2021 Insurance Future Forum' hosted by the Korea Insurance Development Institute under the theme 'Resolving Moral Hazard, a Prerequisite for the Survival of the Insurance Industry' that if moral hazard intensifies, insurance companies may fail to perform their risk coverage function, seriously affecting consumers.

The Korea Insurance Development Institute noted that personal injury medical expenses in automobile insurance increased by 42% over the past five years, with 91% (435.4 billion KRW) of the increase attributed to treatment costs for minor injuries. Among these, the increase in treatment costs for patients receiving Korean traditional medicine was overwhelming, and those with more accident experiences tended to prefer inpatient treatment, which has higher per capita medical expenses.

In indemnity health insurance, the characteristics of moral hazard include inducing overtreatment during specific medical procedures such as cataract surgery (due to increased unit price of multifocal lenses) and encouraging medical shopping, leading to inflated medical bills claimed as insurance benefits. General property insurance also raised concerns about excessive insurance claims, fabrication of accident details, and planned insurance fraud.

Byun Hye-won, director at the Korea Insurance Research Institute, said, "Efforts are needed to reduce the gray area of subjective ethical standards by setting appropriate burden ratios for personal fault and establishing clear guidelines."

Regarding moral hazard in automobile insurance, Park Jin-ho, director of the Automobile Technology Research Center at the Korea Insurance Development Institute, said, "According to overseas research results, there was no risk of occupant injury in minor accidents at speeds below 10 km/h," adding, "It is necessary to establish objective scientific criteria when assessing injury risk from minor car accidents."

In the subsequent panel discussion, the need to develop clinical treatment guidelines to standardize diagnosis and treatment and use them as compensation criteria was emphasized, along with the necessity to establish an authoritative arbitration institution to handle disputes over victim compensation.

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