Insurance Payments Exceed Insurance Premiums
The indemnity insurance loss ratio of South Korean insurers reached 137.2 percent in the first quarter of this year, up 2.6 percentage points from the previous quarter and up 5.9 percentage points from a year earlier. This means their insurance payments exceeded the insurance premiums they received. Especially, the loss ratio of medical indemnity insurance increased 5.9 percentage points from the previous quarter in contrast to expectations that less hospitalization out of concerns over COVID-19 infection would result in a decline in loss ratio.
With insurers predicting that the loss ratio would continue to increase this year, their indemnity insurance losses are also showing a rapid increase. Specifically, the losses added up to 693.1 billion won in the first quarter of this year, up 33.1 percent from a year ago. Their indemnity insurance losses were 2,431.3 billion won in 2019 and this year’s figure is estimated at 2.8 trillion won. Under the circumstances, more and more insurance companies are reducing their indemnity insurance marketing.
The increase in loss ratio is mainly because of medical expenses uncovered by the national health insurance, which differ from hospital to hospital. Medical expenses are divided into those covered by the national health insurance (70 percent of the expenses in many cases), those borne by patients in the national health insurance, and the uncovered expenses. Indemnity insurance covers the second and third parts. The expenses covered by the national health insurance are assessed by the Health Insurance Review and Assessment Service and are cut if necessary. However, the uncovered expenses are determined by hospitals and clinics and even the same treatment is available at different prices in many cases.
This is why more and more insurance companies are calling for the government to strengthen its management by introducing standard prices or the like. Although the government is well aware of the necessity of such measures, nothing has been done for more than a decade due to opposition from the medical community.