[Reporter’s Notebook] Does Changing Insurance Really Change People?

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"The premiums for 5th-generation indemnity health insurance will be significantly reduced. Are you considering switching?"

The reporter asked several acquaintances the same question, but the responses were largely the same.

"What I have now is good enough, so why should I bother changing? What if I end up at a disadvantage after switching?"

The 5th-generation indemnity health insurance reform being promoted by the financial authorities is structured to lower premiums in exchange for reduced coverage. On average, premiums will be more than 30% lower than those of the 4th-generation policies. The aim is to curb excessive use of non-covered medical services and stabilize the loss ratio. Judging by the numbers alone, especially the 'loss ratio,' the reforms appear to be rational. However, consumer sentiment is different. Despite the announcement of the policy change, reactions remain lukewarm.

Why are people hesitant to move to the 5th-generation indemnity health insurance? The answer lies in "loss aversion psychology." Policyholders of earlier generations can maintain their current coverage as long as they keep their existing policies. However, once they switch to the new insurance, those benefits disappear. While people may logically understand that premiums will be cheaper, the anxiety of giving up their current coverage is not easily dispelled. The perceived "loss of coverage" now seems greater than the future savings from reduced premiums.

The perspectives of insurance companies and financial authorities are understandable as well. They are well aware that failing to fix an unsustainable insurance structure will lead to even greater costs in the future. On the other hand, from the policyholder’s viewpoint, there is no reason to give up favorable conditions now and make a choice that feels like a loss.

This phenomenon is not unique to the 5th-generation indemnity health insurance. When the 4th-generation was first introduced, there was some movement, but the pace of switching slowed over time. The perception that new policies are "not as good as the existing ones" is becoming even stronger.

The industry expects to see incentives such as "contract repurchase" or "premium discounts." However, to encourage the spread of the "pay less, get less coverage" approach, more sophisticated persuasion will be necessary. Options such as partly maintaining existing coverage, adjusting it in stages, or implementing a gradual transition scenario that changes the structure over time could also be considered.

Whenever a new insurance product is launched, insurers make significant efforts to induce customers to switch. However, just because the insurance product changes does not mean people will change easily. Even if policy intentions are rational, sometimes what moves people is not "logic" but "perception." If this simple fact is overlooked, the outcome of this reform may already be predetermined.

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