Children’s insurance turns into a financial burden for insurers

(Pixabay)

Children’s insurance, once a key growth driver aggressively marketed by major non-life insurers in South Korea, is now becoming a financial burden as its premium income is falling due to the demographic decline in the country while claims continue to rise.

According to the Korea Insurance Development Institute on Sunday, Korean non-life insurers paid out 1.33 trillion won ($955.04 million) in claims and refunds for children’s insurance (long-term loss insurance with principal and interest guarantees) in the first half of 2025. This marked a 7 percent increase from a year earlier and a 13.5 percent jump compared with 1.17 trillion won in the first half of 2023.

Given that total payouts for all personal insurance, including adult policies, rose 9 percent over the same two-year period, children’s insurance payouts increased at 1.5 times that pace.

While payouts are climbing, insurers’ income from children’s insurance is shrinking. Korean non-life insurers collected 2.29 trillion won in premiums for children’s insurance in the first half of 2025, nearly 5 percent less than the 2.48 trillion won collected a year earlier. By contrast, premiums across all personal insurance grew more than 7 percent year-on-year to 35.68 trillion won.

Children’s insurance is generally purchased by parents for their children. It provides coverage for medical expenses when a child falls ill or is injured as well as paying compensation when a child causes injury to others or damages property.

Since children are more prone to accidents or mishaps than adults, parents have long regarded the product as essential. Non-life insurers took the lead in the market after Hyundai Marine & Fire Insurance Co. launched its children’s CI insurance in 2004 and the view was that the products had an advantage as they could cover liability claims as well as illness and accidents.

Aggressive marketing at childcare expos and fairs also fueled their rapid sales growth, and children enrolled in these policies often remained customers later in life, incentivizing insurers to push the product heavily.

However, the very strategies that made the product appealing are now driving up loss ratios. Some policies included over 100 types of coverage, and as competition intensified, insurers raised the age limit for enrollment from 15 to 30 or even 35, sharply expanding the pool of insureds eligible for payouts.

Claims for outpatient treatment and other benefits surged as more adults joined, adding to the insurers’ burden.

Insurers who were the most aggressive in selling children’s insurance are now struggling. Hyundai Marine & Fire Insurance, a leading player in the segment, saw its consolidated net income fall to 850.5 billion won in 2024 from 1.29 trillion won in 2022 - a decline of more than 400 billion won. Its profits dropped by another 200 billion won in the first half of 2025 compared with the same period a year earlier.

Experts point out that reforms are needed to stop the leak of payouts. Some clinics reportedly overprescribe non-covered treatments to patients with children’s insurance, creating unnecessary costs, while there are also calls to restructure products back towards the original purpose of children’s insurance.

In the race to expand eligibility, insurers began covering illnesses such as stroke and acute myocardial infarction – conditions that are rarely seen in children - which drove up premiums for policyholders alongside loss ratios for insurers.