[50 Trillion Won Loss in Indemnity Insurance] Medical Community's Hesitation Worsens Deficit... Major Surgery Foreseen

Largest Ever Loss Amount This Year
Even with Over 10% Annual Premium Increases
Cannot Keep Up with the Rising Insurance Payouts

[Asia Economy Reporter Oh Hyung-gil] Kim Won-joo (63, pseudonym), who has been suffering from hemiplegia caused by a cerebral hemorrhage in 2017, has undergone more than 1,000 manual therapy sessions over five years while repeatedly being admitted to rehabilitation and nursing hospitals. The medical expenses he claimed from insurance companies exceed 70 million KRW. It was confirmed that he received manual therapy 198 times at nursing hospital A in Incheon from March 5 to 31. This averages to eight treatments per day, with medical costs for manual therapy alone amounting to 12 million KRW.

The financial authorities' announcement of measures against excessive non-reimbursable medical treatments in the medical sector is due to indemnity insurance becoming a bottomless pit. The loss from indemnity medical insurance, which 35 million people in Korea have subscribed to, is expected to reach an all-time high this year.

Although premiums have been raised by more than 10% annually over the past four years, it has been difficult to keep up with the increasing pace of insurance payouts to subscribers. Despite calls to improve the chronic deficit structure, policy failures have repeatedly resulted in temporary measures due to cautiousness toward the medical community, leading to severe aftershocks.

According to the insurance industry on the 20th, the incurred loss amount for indemnity insurance by non-life insurers up to the third quarter was 8.3272 trillion KRW, an 11.4% increase compared to 7.3917 trillion KRW in the same period last year. If this upward trend continues until the end of the year, the annual loss is expected to exceed 12 trillion KRW.

Adding the losses from life insurers, who hold about 18% of the indemnity insurance market, the total incurred loss this year is projected to reach 13 trillion KRW.

Severe Aftershocks of Patchwork Policy Failures
"Considering Differential Premiums for Existing Subscribers"

The cumulative loss from indemnity insurance over the past five years is expected to reach 50 trillion KRW. The incurred loss was 7.5442 trillion KRW in 2017, increasing to 8.7285 trillion KRW in 2018. It surged to 11.0191 trillion KRW in 2019 and soared to 11.7907 trillion KRW last year during the COVID-19 pandemic.

The incurred loss amount includes indemnity insurance payouts, loss investigation costs, and changes in reserves. The more the loss exceeds premium income, the more losses occur. Indemnity insurance has recorded losses for five consecutive years from 2016 to last year.

By product generation, the first generation (old indemnity, sold before September 2009) incurred losses of 1.2838 trillion KRW last year alone. The second generation (standardized, sold before March 2017) also recorded losses of 1.1417 trillion KRW. Even the most recently sold third generation (new indemnity, sold before June 2021) posted losses of 176.7 billion KRW.

Insurance companies maintain that premium increases are inevitable to recover losses. Although there is criticism about raising premiums despite good performance, unlike automobile insurance, premiums paid by subscribers of other insurance cannot be used to cover indemnity insurance deficits.

Major non-life insurers such as Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance have already sent or are preparing to send notices regarding indemnity insurance premium increases for next year. Although the rates vary by company, the increase is reported to be between 10% and 20%.

Jung Sung-hee, a research fellow at the Korea Insurance Research Institute, said, "Indemnity insurance naturally has premium increase factors every year as the age of subscribers increases," adding, "Active support measures such as introducing differential premiums for existing subscribers or contract conversion should be considered."

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