Crackdown on Cataract Over-Treatment Raises Expectations for Improved Q2 Performance of 손보사

Q2 Major Non-Life Insurers' Earnings Expected to Increase 5-10% Year-on-Year
Impact of Cataract Over-Treatment Crackdown and Auto Insurance Loss Ratio Improvement

[Asia Economy Reporter Changhwan Lee] In the second quarter, excessive cataract treatments significantly decreased, reducing the deficit in indemnity insurance and raising expectations for improved performance among domestic non-life insurance companies. With ongoing crackdowns and sanctions on excessive cataract treatments, it is anticipated that the trend of improving indemnity medical insurance deficits will continue into the second half of the year.

According to the insurance and financial investment industries on the 12th, the operating profits of major domestic non-life insurers in the second quarter of this year are expected to improve by around 5% to over 10% compared to the same period last year.

It is analyzed that the long-term risk loss ratio improved due to a clear reduction in excessive cataract treatments in the second quarter. The insurance industry estimates that the indemnity insurance payments for cataracts, which reached a record high of 457 billion KRW in the first quarter, have decreased to less than half in the second quarter.

The worsening deficit in indemnity insurance due to the surge in excessive cataract treatments prompted active responses from the insurance industry and financial authorities, leading to a decrease in excessive cataract surgeries at some ophthalmology clinics and hospitals.

As cataract surgeries decreased, indemnity insurance payments also declined, and the long-term risk loss ratios of major non-life insurers in the second quarter are estimated to have improved by about 3 to 5 percentage points (p) compared to the first quarter. Consequently, there is growing expectation that insurers with a high contribution of cataract surgeries to their long-term risk loss ratios will see better performance.

Shinhan Financial Investment estimated the contribution of cataract surgeries to the long-term risk loss ratios as follows: Hanwha General Insurance 11%, Hyundai Marine & Fire Insurance 4.7%, Samsung Fire & Marine Insurance 4.4%, DB Insurance 4.0%, and Meritz Fire & Marine Insurance 2.5%. Assuming a 40% decrease in insurance claims related to cataract surgeries, the long-term risk loss ratios would improve by 4 percentage points for Hanwha General Insurance, 1.8 percentage points for Samsung Fire & Marine Insurance, 1.7 percentage points for Hyundai Marine & Fire Insurance, 1.4 percentage points for DB Insurance, and 0.9 percentage points for Meritz Fire & Marine Insurance.

With favorable Supreme Court rulings for insurers, the leakage of indemnity insurance payments for cataracts is expected to improve even more in the second half of the year. Last month, the Supreme Court ruled that cataract surgery should not be recognized as inpatient treatment.

Previously, cataract surgery was recognized as inpatient treatment regardless of the patient's individual treatment conditions because it was subject to a comprehensive payment system, but the Supreme Court has put a stop to this. Going forward, cataract surgery will be classified as outpatient treatment, and related indemnity insurance payments will be reduced from a maximum of 50 million KRW for inpatient treatment to about 300,000 KRW for outpatient treatment.

The better-than-expected automobile insurance loss ratio is also a factor brightening the performance outlook for non-life insurers. According to the insurance industry, the average automobile insurance loss ratio of 11 domestic non-life insurers, after preliminary calculations, was 82.7% in May. This was not significantly different from 82.6% in the previous month and was 1.9 percentage points higher than the 80.8% recorded in the same period last year.

Although traffic volume increased as the government eased COVID-19 social distancing measures in the second quarter, the automobile insurance loss ratio did not deteriorate significantly. Some insurers, such as Hyundai Marine & Fire Insurance and Meritz Fire & Marine Insurance, even showed improvements in their loss ratios.

Doha Kim, a researcher at Hanwha Investment & Securities, said, "The simultaneous improvement in the profitability of indemnity insurance and automobile insurance is a fundamental factor enhancing the profit strength of insurers," adding, "It is especially positive that specific regulations by financial authorities and the Ministry of Health and Welfare on excessive treatments have begun."

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