Why Did Real Loss Insurance Premiums Surge 60% Over 5 Years?

[Asia Economy Reporter Changhwan Lee] Over the past five years, the premium increase rate for indemnity health insurance (실손보험, Silson Insurance) by domestic insurers has exceeded 60%. As the loss ratio rises, insurers are raising indemnity insurance premiums to avoid deficits, which is expected to increase the burden on customers.

According to the industry on the 5th, the cumulative premium increase rate for the '1st generation' indemnity insurance (sold until September 2009) from 2017 to 2021 averaged 76.8% among the five major non-life insurers (Meritz, Samsung, Hyundai, DB, KB).

The average increase rate for the 1st generation indemnity insurance over the past five years among the three major life insurers was 28.3%. The combined average increase rate for the 1st generation indemnity insurance among the top five non-life insurers and the top three life insurers was 63.6%.

By company, MG Non-Life Insurance saw its 1st generation indemnity insurance premiums rise by 117.7% over the past five years, followed by Hanwha Non-Life Insurance (105.5%), Heungkuk Fire & Marine Insurance (86.4%), Hyundai Marine & Fire Insurance (81.3%), and Samsung Life Insurance (45.9%), all showing relatively high increase rates.

For policies subscribed since 2013, the cumulative premium increase over the past five years was 85.0% among the five major non-life insurers and 52.2% among the three major life insurers. The average increase rate for standardized indemnity insurance subscribers among the top five non-life insurers and top three life insurers since 2013 was 76.4%.

The significant rise in premiums for the older generation indemnity insurance is due to a sharp increase in the loss ratio, which has led to growing deficits for insurers.

The non-life insurance industry decided to significantly raise premiums this year after estimating that the risk loss ratio for indemnity insurance exceeded 130% last year, with losses reaching between 2.6 trillion and 2.7 trillion KRW.

The Korea Insurance Research Institute predicted that even with an annual premium increase of 13.4%, cumulative deficits over the next ten years could reach 100 trillion KRW.

The insurance industry explains that the rising loss ratio is due to excessive medical treatments by some insured individuals and hospitals.

Older generation indemnity insurance policies require little to no co-payment from the insured when receiving treatment. Because of this, it is argued that over-treatment is widespread among holders of these older policies, who tend to receive treatment first and worry about costs later.

However, some critics argue that insurers initially designed the policies poorly and are now shifting the burden onto consumers.

The Financial Consumers Federation emphasized, "The fundamental causes of the rising loss ratio, which is driving premium increases, are excessive operating expenses and over-treatment leading to insurance payout leakage. Insurers have failed to address these issues and are simply using opaque loss ratios as an excuse to easily raise premiums, shifting responsibility onto consumers."

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