Premium in private actual expense health insurance to rise 8.9% next year

General Insurance Association of Korea [Photo by Lee Chung-woo]

Premium in health expenses not covered by the government’s insurance program will rise 8.9 percent on average next year as Korean insurance firms struggle to cover the ballooning losses from medical costs.

According to the General Insurance Association of Korea and Korea Life Insurance Association on Wednesday, local insurance firms will raise the premium in the first-generation actual expense health insurance program by 6 percent on average, the premium in the second-generation insurance by 9 percent, and the premium in the third-generation insurance by 14 percent next year. The premium in the fourth-generation insurance, the type sold currently, will remain unchanged.

The rate of increase in premium will vary depending on the coverage options and other terms of policy per insurance holder.

Actual expense health insurance is a private health insurance policy that covers out-of-pocket medical expenses. Many Koreans have the private-sector health insurance as a supplement to the national health insurance.

Insurance firms have been raising premium in the actual expense health insurance over the past several years, citing mounting losses from those policy holders and hospital operators who take advantage of the system. The losses are estimated at 3 trillion won ($2.3 billion)

[Source : Gettyimagesbank]

The premium rose by 6~7 percent on average in 2020, 10~12 percent in 2021 and 14.2 percent last year. Insurance firms initially planned to make an additional double-digit increase next year but backed off following the authorities‘ efforts to reduce the burden on the public from the rising inflation.

However, insurance firms say it will be inevitable to raise the premium in the actual expense health insurance over the next 10 years as losses build up fast from unfair practices, such as excessive medical treatment.

The insurance industry sees the reasonable loss ratio at around 80 percent but the ratio hovers at 141.9 percent for the first-generation type, 123.8 percent for the second-generation and 129.3 percent for the third-generation, said Kim Kyung-seon, a researcher at Korea Insurance Research Institute. Under the current structure, insurance firms need to raise the premium by 21 percent or more every year to normalize their operations, Kim explained.

While raising the premium in the actual expense health insurance, the firms are encouraging their existing customers to change their insurance policy to the fourth-generation type. The currently sold policy has less coverage but is much cheaper, with monthly premium cut by as much as 70 percent.