"Managing Loss Ratios Is Difficult Even Now"…Reluctance in Developing Infectious Disease Insurance (Comprehensive)

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[Asia Economy Reporter Oh Hyung-gil] Despite calls for the development of insurance specialized in infectious diseases following the COVID-19 pandemic, insurance companies are expressing reluctance.

Although insurance products covering vaccine side effects have attracted consumer interest and related products are expected to perform well, detailed issues such as appropriate premium calculation and loss ratio management are complex.

According to the insurance industry on the 4th, Financial Services Commission Chairman Ko Seung-beom said at a meeting with insurance company CEOs the day before, "We will promote inter-agency consultations to activate 'infectious disease insurance' so that insurance can proactively respond to new risks arising from infectious diseases and new technologies."

Chairman Ko pointed out, "Although the Korea Insurance Development Institute (KIDI) developed the first infectious disease insurance risk assessment model, activation is not easy." Currently, KIDI has completed the development of a risk assessment model for infectious disease insurance. The risk assessment model predicts the scale of damage caused by infectious diseases, serving as a reference for insurance companies to create infectious disease insurance products based on it.

Although the risk assessment model has been developed, insurance companies face many considerations before launching insurance products. They need to evaluate the possibility of new infectious diseases emerging, long-term loss ratio trends, and appropriate premiums.

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In particular, the insurance industry complains that managing loss ratios will not be easy. They cite the example of whether to cover the oral COVID-19 treatments currently under development.

The government announced that it will pre-purchase a total of 404,000 doses of oral COVID-19 treatments from three pharmaceutical companies: Merck & Company (MSD), Pfizer, and Roche. Depending on the supply schedule, these treatments are expected to be available domestically from the first quarter of next year. Merck’s ‘Molnupiravir,’ the world’s first oral COVID-19 treatment, is priced at $700 (approximately 820,000 KRW) per set (taken twice daily for five days).

However, it has not yet been decided who will bear the cost of the treatment and how. The entire cost may be covered by health insurance, or patients may have to pay part of it out-of-pocket as non-reimbursable expenses. If designated as non-reimbursable, it is uncertain whether indemnity medical insurance will cover it. This is pointed out as a factor that could further worsen the already skyrocketing loss ratios of indemnity insurance.

Currently, there is no insurance overseas that directly compensates for infectious diseases. After the COVID-19 pandemic, Taiwan, Singapore, and China have only introduced insurance products that support treatment costs or compensate for losses due to confirmed cases.

In Taiwan, after COVID-19 was classified as a legally designated infectious disease, a new health insurance product covering it was launched. They also developed indemnity insurance compensating for damages to quarantined individuals or confirmed patients. However, Taiwan Fire & Marine Insurance stopped selling the product after insurance fraud occurred, where confirmed patients deliberately visited places to claim insurance payouts.

The financial authorities stated, "We are considering joint underwriting plans for risks that individual insurers find difficult to bear and are also contemplating premium support measures."

An insurance industry official said, "Developing insurance products that must bear large-scale risks like infectious diseases is not simple. However, we will actively participate in related discussions based on the role of social safety nets."

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