Next Year, Average Real Loss Insurance Premiums Increase by 8.9%... 3rd Generation Up 14%

In High Inflation Era, Authorities' Request Limits Increase to Single Digits
Continued Promotion of 4th Generation Real Loss Insurance Transition Expected

[Asia Economy Reporter Minwoo Lee] The premiums for indemnity health insurance, known as the second health insurance, will increase by an average of 8.9% starting next year.

On the 21st, the Life Insurance Association and the General Insurance Association announced through discussions among insurers that the overall average increase rate for indemnity insurance next year (weighted average based on earned premiums) will be around 8.9%. This is a single-digit increase compared to last year's 10-12% and this year's approximately 14.2% rise.

Specifically, the first and second generation indemnity insurance premiums will increase by an average of 6% and around 9%, respectively. The third generation indemnity insurance, whose rates have been frozen for over five years since April 2017, is expected to rise by about 14%. The fourth generation will remain frozen.

Initially, insurers argued that a double-digit increase was inevitable due to annual deficits of around 2 trillion won caused by excessive medical treatments in indemnity insurance, but the increase was adjusted to a single digit in line with the government's price stabilization policy.

This increase rate is an average level provided by insurers for consumer guidance and is not uniformly applied to all policyholders. The increase rate applied to individual policyholders may vary depending on the renewal cycle, type of subscribed product, age, gender, and the loss ratio situation of each insurance company.

The level of individual indemnity insurance premium increases can be known at the time each personal insurance contract is actually renewed. It can be confirmed through the premium renewal notice sent by the insurance company via written documents, email, or Kakao Alimtalk.

The insurance industry plans to actively encourage users to switch to the fourth generation indemnity health insurance. To this end, the deadline for providing a 50% discount on premiums for one year to policyholders switching from the first to third generations to the fourth generation indemnity insurance has been extended from the end of this year to the end of June next year.

Indemnity insurance is divided into four generations depending on the launch time. The fourth generation insurance, launched in July last year, is about 75% cheaper than the first generation, 60% cheaper than the second generation, and about 20% cheaper than the third generation. However, to prevent insurance payout leakage caused by 'excessive non-reimbursed treatments,' the more hospital visits, the higher the out-of-pocket medical expenses become. Until the first half of this year, the average loss ratio of indemnity insurance approached 130%. This means that for every 100 won received in premiums, 130 won was paid out in claims.

A representative from the General Insurance Association said, "Preventing insurance payout leakage caused by excessive non-reimbursed treatments and insurance fraud is necessary to resolve the accumulated deficits of indemnity health insurance and rationalize the premium burden on policyholders." He added, "We will prepare improvement measures and propose them to government authorities, discuss ways to strengthen the use of public medical data with health authorities, and continue consultations with the medical community to simplify indemnity claims."