[1mm Financial Talk] 'Japan Sales Suspension' COVID Insurance, Why It Never Existed in Korea

On the 8th, when the number of new COVID-19 cases remained in the 30,000s for the fourth consecutive day, citizens lined up at a temporary screening clinic in front of Seoul Station. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Changhwan Lee] As COVID-19 Omicron variant cases surge worldwide, Korean and Japanese insurance companies are experiencing contrasting fortunes.

Japanese insurers that actively launched products paying insurance benefits upon COVID-19 diagnosis are facing difficulties, while domestic insurers that did not release such products are breathing a sigh of relief.

According to Japanese media including Yomiuri Shimbun on the 8th, Japanese insurers offering COVID-19-related products have recently taken measures such as suspending sales or significantly raising premiums as confirmed cases have surged.

Daiki Life Insurance decided to suspend sales of its COVID-19 coverage insurance, launched in December last year, starting from the 4th of this month. This product offers a lump sum payment of 100,000 yen (approximately 1.04 million KRW) if hospitalized due to COVID-19, with a monthly premium of around 300 yen (about 3,100 KRW).

It gained popularity initially, with over 50,000 subscribers, as it allowed coverage against COVID-19 risks for a small premium. However, with daily new COVID-19 cases in Japan surpassing 100,000 recently, the insurance loss ratio faced a sharp increase, prompting the company to halt sales.

Jeil Smart Micro Short-term Insurance also raised premiums for its mini insurance covering COVID-19 by four times this month. This product pays 100,000 yen upon hospitalization due to COVID-19, but premiums were significantly increased to avoid deficits amid the surge in confirmed cases.

Unlike Japan, Korean insurance companies do not have products solely covering COVID-19. When COVID-19 first emerged domestically in early 2020, several insurers considered launching COVID-19 insurance products similar to those in Japan. Some even planned products with exceptional terms, such as paying about 10 million KRW upon COVID-19 diagnosis.

However, the financial authorities blocked these products at the approval stage. The Financial Supervisory Service expressed concerns that selling insurance products paying benefits upon COVID-19 diagnosis could lead to moral hazard, where individuals might deliberately get infected to claim insurance.

Since COVID-19 has a lower fatality rate compared to other diseases, there were worries that some might subscribe to multiple products to seek overlapping compensation.

Additionally, the lack of sufficient statistics on the COVID-19 virus raised concerns about potential disputes and a decline in the insurance industry's credibility if such products were launched. Following the negative stance of financial authorities, domestic insurers abandoned plans to release related products.

At the time, some in the insurance industry complained that launching products while considering various risks is the essence of insurance, and that the government was being overly sensitive.

However, now there is more sentiment that the government's regulation was fortunate. With the possibility of daily COVID-19 cases reaching 100,000 domestically this month, had such insurance products been launched, insurers could have faced significant losses.

A representative from a domestic insurance company said, "Looking at the current explosive increase in Omicron variant cases, it feels fortunate that we did not launch COVID-19 insurance products due to the financial authorities' earlier discouragement."