Financial Services Commission Launches Policy Council for Sustainable Real-World Insurance

Discussion on Current Issues and Challenges of Silson Insurance

[Asia Economy Reporter Jin-ho Kim] Financial authorities have launched a policy consultative body for sustainable indemnity insurance. The consultative body will comprehensively review measures that can help alleviate the medical expenses burden on the public in the future.

According to the Financial Services Commission (FSC) on the 19th, the FSC, together with the Ministry of Economy and Finance, the Financial Supervisory Service, the Korea Insurance Research Institute, and the Insurance Association, launched the consultative body and held its first meeting on the same day. The meeting discussed current issues and challenges of indemnity medical insurance and plans to promote the transition to the 4th generation indemnity insurance.

According to the Korea Insurance Research Institute, indemnity insurance is raising concerns about sustainability due to a sharp increase in loss ratio (exceeding 130%). While premium increases are adding to the burden on policyholders, the number of insurers discontinuing the sale of indemnity insurance is also steadily increasing.

The institute pointed out that the complex causes include insurers' past flawed product designs, excessive medical treatment and medical shopping by medical institutions and patients. It also identified issues with claim convenience and the relationship with public insurance as areas for improvement.

Accordingly, the Korea Insurance Research Institute plans to strengthen the management of non-reimbursable expenses to prevent excessive medical treatment and to reorganize the product system to enhance fairness in premium burden. It will also initiate institutional improvements to digitalize indemnity insurance claims and to prevent gaps in medical coverage.

The meeting also emphasized the need to actively encourage the transition to the 4th generation indemnity insurance, which was launched in July last year. To this end, insurers plan to seek discount benefits, convenience improvements, and enhanced information provision to promote contract conversion. Policyholders who convert their contracts to the 4th generation indemnity insurance within the first half of this year will receive a 50% discount on premiums for one year.

Financial authorities will also monitor the transition status to encourage insurers to actively promote the shift to the 4th generation and reflect the performance in the Risk Assessment and Analysis System (RAAS) for management evaluation.

An FSC official explained, "From the end of January, we plan to form a working consultative body with the insurance industry and related organizations to identify and discuss specific institutional improvement tasks," adding, "We will review measures to reduce the public's medical expenses and insurance premium burdens."