Fifth-Generation Indemnity Health Insurance Launches Next Month... Premiums to Drop to 40% of Second-Generation as Therapeutic Massage Coverage Removed

Reorganized to Focus on "Severe and Essential Coverage"

Policy Buyback and Optional Riders for First- and Second-Generation Plans to Be Introduced in the Second Half of the Year

The fifth-generation indemnity health insurance, which will reduce non-covered benefits and reorganize coverage to focus on essential and severe cases, is set to launch next month. Premiums are expected to be about 40% of those for the second-generation policies, which have the largest number of subscribers among existing products.

Therapeutic massage image. The Asia Business Daily DB

According to financial authorities and the insurance industry on April 26, most non-life insurance companies are preparing to launch their fifth-generation indemnity insurance products in early May. A representative from the financial authorities stated, "The fifth-generation indemnity insurance is designed to provide essential coverage at a low cost, thereby reducing the burden on consumers and curbing excessive medical use, which will benefit all consumers."

Premiums for the fifth-generation indemnity insurance are expected to be around 17,000 won per month for men in their 40s and around 40,000 won for women in their 60s. According to public disclosures by non-life insurers, the second-generation product costs about 45,000 won for men in their 40s and about 112,000 won for women in their 60s. Approximately 43% of subscribers are enrolled in the second-generation product.

The fifth-generation product will be reorganized to focus on coverage for severe conditions. While coverage for severe non-covered services will remain the same as in previous products, the benefit limits and reimbursement rates for non-severe, non-covered services will be reduced.

Services such as therapeutic massage and unregistered new medical technologies will not be covered. The co-payment rate for non-severe, non-covered services will be raised to as much as 50%. The purpose is to reduce excessive non-covered treatments and normalize medical costs.

For covered benefits, the co-payment rate for inpatient treatment will remain at the current 20%, while that for outpatient treatment will be partially increased in line with the patient's co-payment rate under the national health insurance system.

According to the Financial Supervisory Service, premiums for second-generation indemnity insurance products have increased by an average of about 12% per year over the past decade.

The main reason for premium increases is cited as the low co-payment rates—10% for covered services and 20% for non-covered services—which have led to an increase in unnecessary medical utilization.

Along with the launch of the fifth-generation indemnity insurance, authorities plan to announce, in early May, measures to encourage conversion of first- and second-generation policies, including a policy buyback scheme and new guidelines for optional riders. These related systems are expected to be implemented in the second half of the year following a preparation period.

It has been reported that a plan is under discussion to offer about a 50% reduction in premiums over three years for approximately 16 million first-generation and early second-generation policies that do not have re-enrollment conditions.

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