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제목 Overview of the Medical Expense Insurance Market in Korea

Overview of the Medical Expense Insurance Market in Korea

The medical expense insurance market in Korea has been growing amid rising demand for health care and health insurance covers. Premium income jumped by 10.4% to KRW 11.6 trillion in 2021 due to price increases and new business growth, while the number of in-force policies went up by 1.6% to 35.5 million as of the end of 2021. Medical expense insurance, which is also called indemnity health insurance,  is classified as third sector insurance and may be written by either life or non-life insurance firms.

(Source: Financial Supervisory Service, May 2, 2022)


However, widening underwriting losses have been a major concern for the insurance industry. In 2021, insurers collectively reported KRW 2,860.2 billion in underwriting losses, and their underwriting results have deteriorated over the past five years. The incurred loss ratio climbed to 113.1% in 2021, up 1.3%p from 2020. In particular, the ratio for non-life insurers reached 117.2% in 2021 compared to 94% for life insurers.

 (Source: Financial Supervisory Service, May 2, 2022)


A continued increase in claims not covered by the National Health Insurance (NHI) program was a primary culprit behind soaring loss ratios and the subsequent premium rate hikes. The claims of a small percentage of policyholders for non-NHI covered treatment was unfairly pushing up the premiums for other policyholders.

Against this backdrop, a new form of medical expense insurance, or the fourth version, has become available since July 2021. Under the new plan, lower premiums are charged with higher deductibles, but the coverage limits remain similar to that of the previous version of insurance. The base policy is applied only to medical expenses covered by NHI, while a rider needs to be added for non-NHI covered expenses. Separating the two types of expenses was intended to curb moral hazards such as overtreatment by doctors or medical service providers and superfluous spending on health care services by consumers. It will also help address the concern that premium rates have been excessively rising due to increasing claims. Individuals who are currently covered under previous medical expense insurance plans can easily switch to the new version that offers lower premiums through a simplified screening process.

Medical expense insurance, which covers most of the copayment requirements under the NHI scheme, makes up a major pillar of the private health insurance market in Korea, with about 75% of the population having purchased the insurance. Since medical expense insurance was first introduced in 1999, it has gone through three rounds of revamp to the current fourth version, and now over 39 million individuals are found to be covered by any one form of medical expense insurance.


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