[Reporter’s Notebook] Chronic Deficits in Silson and Car Insurance... Over-treatment Practices Must Be Addressed First

[Asia Economy Reporter Oh Hyung-gil] The indemnity health insurance and automobile insurance, often called the "people's insurance," are struggling with perennial deficits. The cumulative operating loss of automobile insurance has exceeded 7 trillion won from 2011 to last year. Even last year, when loss ratios improved due to reduced traffic and medical usage amid the COVID-19 pandemic, a deficit approaching 400 billion won occurred.

As insurance companies have consecutively stopped sales or raised premiums, the burden is being passed directly onto policyholders. A policyholder in their 60s who subscribed to indemnity insurance in the 10,000 won range in 2006 complained that after three renewals every five years, this year's premium has exceeded 130,000 won. This policyholder argued that if the premium increase rate, nearing 360%, continues until the maturity age of 80, the premium will reach 6.15 million won, questioning what the financial authorities are actually doing.

The problem is that people who find premiums burdensome to maintain their insurance but are too old to newly subscribe will only increase in number going forward.

The financial authorities plan to launch the "4th generation indemnity insurance" in July to resolve the insurance deficit issue and prepare improvement measures for automobile insurance treatment compensation systems starting in the second half of this year. The insurance industry has responded positively, saying these measures can improve the entrenched deficit structure.

The common point of these two solutions is that the more medical usage there is, the more the self-pay (premium) will increase. The 4th generation indemnity insurance applies premium discounts or surcharges based on medical usage volume, and the treatment compensation system is based on handling the policyholder's fault portion through their own insurance according to the accident fault ratio.

This can help improve loss ratios immediately. However, there is criticism that the social role of insurance will inevitably shrink in the long term. Receiving treatment by paying out of pocket despite having insurance contradicts the insurance principle of mutual aid. There is even a risk of side effects where people may not receive adequate treatment after an accident due to the costs they must bear themselves.

For a long time, the insurance industry has continuously demanded the establishment of an organization to review and decide automobile insurance medical fees or to start discussions on improving medical fee standards for Korean medicine treatment items. It is time for the government to listen to calls for improving medical practices that induce excessive treatment.