Is Duplicate Enrollment in Indemnity Insurance Always a Loss? ...When It Can Be Beneficial

Approximately 1.47 Million Duplicate Subscribers of Actual Loss Insurance
61,731 Between Individuals, 1,375,490 Between Individuals and Groups
Coverage and Amount May Be Beneficial in Case of Duplicate Enrollment...Careful Verification Required

In August, the total number of duplicate subscribers to indemnity insurance reached approximately 1,468,000, raising concerns about increased consumer burden. The photo is unrelated to specific expressions in the article. [Image source=Getty Images]

[Asia Economy Reporter Yoon Seul-gi] As the number of duplicate subscribers to indemnity insurance reaches about 1.47 million, concerns have been raised that this harms consumer benefits. Indemnity insurance follows the principle of proportional compensation, meaning insurance payouts cannot be received multiple times for the same claim. However, insurance companies do not sufficiently inform customers about the possibility of suspending individual insurance policies, leading to unnecessary expenses for subscribers.

However, duplicate subscriptions are not always disadvantageous. Since there are advantages in terms of coverage scope and amount, consumers need to carefully compare their options.

According to data submitted and disclosed by Park Sung-jun, a member of the National Assembly’s Political Affairs Committee from the Democratic Party of Korea, obtained from the Financial Supervisory Service and others, as of August this year, the total number of duplicate indemnity insurance subscribers was estimated at approximately 1,468,000.

Looking at the duplication status by individual and group insurance, there were 1,375,490 cases of individual-group duplication, 58,469 cases of group-group duplication, and 61,731 cases of individual-individual duplication.

Among them, only about 16,000 subscribers suspended their individual indemnity insurance contracts. From the insurance companies’ perspective, they continue to collect premiums redundantly from about 1,452,000 subscribers. The average annual premium per contract is 360,000 KRW, so if a person is subscribed to at least two indemnity insurances, it is estimated they pay 720,000 KRW per year.

Ultimately, it was pointed out that about 500 billion KRW, which is half of the annual premiums collected, only serves to fatten the insurance companies’ profits. Representative Park said, "While indemnity insurance plays a role in stabilizing people’s livelihoods by reducing medical expenses, the issue of duplicate subscriptions, which has been pointed out for years, remains unresolved. It is highly inappropriate for insurance companies to profit from customers’ blind money."

The reason duplicate subscriptions are problematic is that having two indemnity insurances does not double the benefits. Indemnity insurance is characterized by proportional compensation only within the actual loss amount. For example, if a person has two indemnity insurances and incurs 1 million KRW in hospitalization treatment costs, excluding a 20% deductible of 200,000 KRW, they receive 800,000 KRW from the insurers. This amount is divided proportionally between the two insurers, each paying 400,000 KRW according to their liability limits.

The photo is not related to specific expressions in the article. [Image source=Pixabay]

However, there are cases where duplicate subscribers benefit. This occurs when the total treatment cost exceeds the coverage limits of individual and group indemnity insurances. For example, if treatment costs amount to about 70 million KRW, and Insurance A’s maximum coverage is 30 million KRW while Insurance B’s maximum coverage is 40 million KRW, the subscriber can receive benefits from both insurances.

Additionally, the scope of compensation can be expanded. When an individual subscribes to two indemnity insurances or both individual and group indemnity insurances, they can receive benefits over a wider range. Also, group indemnity insurance often has weaker coverage than individual insurance, so consumers need to make careful choices.

Jung Sun-hee, head of the Industrial Research Office at the Korea Insurance Research Institute, explained, "There are cases where people voluntarily subscribe to duplicate indemnity insurances between individual-individual or individual-group. For example, when the previously subscribed indemnity insurance has a smaller coverage amount or scope, and it is difficult to cancel because it was subscribed a long time ago. The first-generation indemnity insurances were not standardized, so product details varied by insurer, and some coverages are no longer included."

She added, "In cases of duplicate subscriptions between individual and group indemnity insurances, people maintain all insurances because re-subscribing to individual indemnity insurance is impossible after retirement or resignation. This is why there are many current duplicate indemnity insurance subscribers."

Meanwhile, earlier this month, the Financial Supervisory Service proposed improvements to address this issue. Previously, when reactivating individual indemnity insurance, the conditions of the product sold at the time of reactivation were applied rather than the original subscription conditions. The new plan allows subscribers to choose between the 'product at the time of re-subscription' and the 'previous product subscribed to at the time of suspension' when re-subscribing to individual indemnity insurance.

Regarding concerns that premiums might increase upon re-subscription, Jung said, "Even if you maintain indemnity insurance products continuously, premiums inevitably rise. Premiums increase based on comprehensive factors such as age. Re-subscribing itself does not cause premiums to increase."