1st Generation Real Loss Insurance with High Premiums... Only 20,000 Switching to 4th Generation

Four Months After 4th Generation Launch... Big 5 Non-Life Insurers Sell Only 300,000 Policies
Premiums Up to 70% Cheaper... Only 9% Switch to 1st Generation

[Asia Economy Reporter Oh Hyung-gil] Since the launch of the 4th generation indemnity health insurance, the rate at which existing indemnity subscribers have switched their contracts has been found to be less than 20%. Although the loss ratio of indemnity insurance has been soaring recently and a double-digit premium increase is expected next year, subscribers are reluctant to switch contracts even if the premiums are expensive.

According to the non-life insurance industry on the 29th, the total number of 4th generation indemnity insurance policies sold by the five major non-life insurers?Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and Meritz Fire & Marine Insurance?from July to October was 299,618.

In the first month of launch, July, 63,687 policies were sold, followed by 78,051 and 78,471 contracts in August and September, respectively. Last month also saw only 79,409 policies sold, showing no significant increase in the number of subscriptions over the four months. This is less than half of the monthly average sales of 252,897 policies in the first half of this year.

The problem is that existing indemnity subscribers are not switching to the 4th generation. Existing indemnity insurance is categorized into the 1st generation sold until September 2009, the 2nd generation sold from October 2009 to March 2017, and the 3rd generation sold from April 2017 to June this year.

Among these, the number of 1st generation subscribers who switched to the 4th generation is 27,686, accounting for only 9.2% of the 4th generation sales. The switch from the 2nd to the 4th generation was 22,103 (7.3%), and from the 3rd to the 4th generation was only 1,388 (0.4%).

As of the third quarter this year, the non-life insurance industry estimates that there are 7.69 million 1st generation indemnity subscribers, 13.29 million 2nd generation, and 7.53 million 3rd generation. Even considering the 4th generation indemnity insurance sales of other non-life insurers excluding the five major companies that account for over 80% of the indemnity insurance market, the rate of switching among existing subscribers to the 4th generation remains extremely low.

Most of the remaining approximately 240,000 contracts, excluding contract switches, are new subscriptions, but even these have not increased compared to the monthly average new subscriptions of 168,720 in the first half of the year.

The 4th generation indemnity insurance attracted attention at launch for having lower premiums than existing indemnity insurance. For a 40-year-old man, the average monthly premium for indemnity insurance by non-life insurers is 40,749 KRW for the 1st generation, 24,738 KRW for the 2nd generation, and 13,326 KRW for the 3rd generation, while the 4th generation is known to be 10-70% cheaper at 11,982 KRW.

The insurance industry interprets the reason why many subscribers bear the high premiums but do not switch to the 4th generation as the premium increase being at a tolerable level compared to the advantages of existing indemnity insurance. A representative advantage of existing indemnity insurance is the lower deductible rates: 0-20% for the 1st generation, 10-20% for the 2nd generation, and 10-30% for the 3rd generation.

The more existing subscribers maintain their current indemnity insurance, the more rapidly the loss ratio of indemnity insurance is expected to rise. As of the end of September, the risk loss ratio for the 1st generation reached 140.7%, meaning that for every 100 KRW paid in premiums, 140 KRW was paid out in claims. The 2nd generation had a risk loss ratio of 128.6%, and the 3rd generation 112.1%.

As the loss ratio rises, it leads to premium increases. Last year, premiums increased by an average of 9%, and this year by about 10-12% on average. In April, premiums for 1st generation products were raised by up to 21.2%.

A non-life insurance company official said, "As indemnity subscribers age, the likelihood of illness and hospital visits increases, so they are not switching to the 4th generation immediately," adding, "Although separate screenings were eliminated to make it easier for existing subscribers to switch, it has been insufficient to change consumers' minds."

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