[Getting Insurance Savvy] Real Losses Pile Up in Actual Loss Insurance... Consumer Harm from Sales Suspension 'Boomerang'

Discontinuation of Indemnity Insurance Launch... Indemnity Insurance Premiums to Rise Further

[Asia Economy Reporter Oh Hyung-gil] Is there really sustainability for an insurance that incurred a loss of 1.7 trillion won in just the first half of the year?

Losses from indemnity health insurance are estimated to exceed 1.7 trillion won by June this year. Insurance companies facing increasing loss burdens are complaining that they have no choice but to declare sales suspensions.

The loss amount from indemnity insurance held by non-life insurers in the first half reached 1.4128 trillion won, a 17.9% increase from 1.1981 trillion won during the same period last year. When adding the losses from life insurers’ indemnity insurance, the total loss in the insurance industry for the first half is estimated to reach 1.7 trillion won.

Last year, the risk loss ratio for indemnity insurance was 130.5%, exceeding 130% for two consecutive years following 2019 (134.6%). This means that for every 100 won received in premiums, 130 won is paid out in claims, resulting in a loss.

According to the Financial Supervisory Service, indemnity insurance has recorded losses for five consecutive years since 2016, and insurers selling indemnity insurance posted a 2.5 trillion won loss last year.

Although the 4th generation indemnity insurance was launched in July, sales have not followed to offset the decline in loss ratios.

The insurance industry points to excessive medical treatment by hospitals and clinics as the cause of indemnity insurance deficits. Non-reimbursed medical expenses, such as cataract surgery and manual therapy, which are not covered by health insurance, have rapidly increased, and there are criticisms that management of non-reimbursed expenses is not being properly conducted.

In particular, the amount of insurance claims related to cataracts paid by 10 non-life insurers sharply increased from 249 billion won in 2018 to 425.5 billion won in 2019, and 637.4 billion won last year. In the first half of this year, it reached 481.3 billion won, a 58.2% increase compared to the first half of last year.

As the number of cataract patients surged, cases of insurance fraud exploiting cataract surgery have also increased. According to the Financial Supervisory Service, among 446,000 recipients of cataract surgery insurance claims over the past five years (2016?2020), 17,625 had a history of insurance fraud, accounting for 3.8% of the total.

Due to rising loss ratios, more insurers are suspending sales. Dongyang Life and ABL Life did not launch the 4th generation indemnity insurance, leaving only five life insurers handling indemnity insurance. In the non-life insurance sector, three companies, including AXA General Insurance, do not handle indemnity insurance.

An industry official said, "There is a lack of mechanisms to control excessive medical treatment by medical institutions, and some hospitals and clinics are seriously morally hazardous by paying commissions to brokers to gather patients and gain unfair profits," adding, "Urgent measures to control non-reimbursed medical treatments must be established."