[Click eStock] Actual Loss Insurance Premium Increase Higher Than Expected but Direction Remains Moderate

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment suggested increasing the weighting on the insurance sector on the 29th. This is because the much-feared increase in actual loss insurance premiums is understood to be concluding relatively reasonably.

Lee Hong-jae, a researcher at Hana Financial Investment, stated, "The increase rate of actual loss insurance premiums next year is decided at a level exceeding last year's increase and the existing market expectations. In addition, various approaches to prevent moral hazard are reportedly being considered." He explained, "The current rate adjustment is insufficient to completely dispel uncertainties related to actual loss insurance in the short term, so it will not act as short-term stock momentum. However, the regulatory direction being more lenient is judged positively in the mid to long term."

The actual loss insurance premium is known to increase by an average of about 15-16% next year. Although the finalized figure has not been confirmed yet, it is expected that the actual number will not differ significantly since the risk rate calculation is believed to have already been completed in terms of timing. The 1st and 2nd generations will see an increase due to the reflection of risk rates, and for the 3rd generation, the stabilization discount special contract will be excluded, which has an approximate 9% increase effect. If the exclusion of the 3rd generation discount special contract is considered as an increase and weighted averages are calculated based on the proportion of each product, the 1st generation increase rate is estimated at about 19%, and the 2nd generation about 18%. The 1st generation increase rate is similar to last year’s level, but the 2nd generation products, which account for about 50% of all actual loss contracts, are expected to have an increase rate about 5 percentage points higher than the previous year.

Various measures are being discussed regarding the issue of actual loss insurance loss ratios heading in an abnormal direction, such as the cataract surgery insurance payout expected to rise by 77.9% compared to the previous year. First, the financial authorities have announced plans to improve the non-reimbursable payment standards, and the industry is reportedly reviewing measures to separate policyholders who engage in excessive medical shopping from normal policyholders, such as premium bifurcation and premium discounts when existing policyholders switch to 4th generation products. Additionally, proposals to shorten the re-enrollment cycle to one year are being made, actively exploring alternatives beyond simple premium increases.

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