President Lee Jae-myung has promised to reduce the premium for indemnity insurance, marking a new phase in the ongoing reform of indemnity insurance. Previously, financial authorities had promoted a re-enrollment plan that would provide compensation if first- and second-generation policyholders who enrolled before April 2013 transferred to a new product (fifth generation). However, the new administration aims to lower the premiums for the first- and second-generation to encourage them to maintain their contracts. If the promise is successfully implemented, both insurance companies and policyholders are expected to benefit.
According to the insurance industry and others on the 9th, President Lee promised to introduce a "selective rider" in indemnity insurance. The insurance industry expects that this will allow customers to give up coverage for treatments and illnesses they consider unnecessary. For instance, a policyholder with no family history and good health, who is not concerned about cardiovascular diseases, could choose to set a rider that limits their coverage for cardiovascular treatments, meaning if they contract such a disease, they would not receive insurance benefits. In exchange for giving up coverage for cardiovascular diseases, they would pay lower premiums. This means policyholders can save on premiums by eliminating coverage they deem unnecessary.
If the promise is realized, first- and second-generation policyholders will have less reason to transfer to the currently available fourth generation or the fifth generation set to launch at the end of this year. The issue for first- and second-generation policyholders is that while there are no or low deductibles and the coverage and benefits are good, the premiums are high. Older adults, who use medical services frequently, want to maintain their contracts but find the benefits limited due to high premiums and are considering transferring to the cheaper fourth and fifth generations. However, if the premium burden is alleviated, they may not have to give up their first and second generations.
Therefore, the promise of the selective rider is analyzed to differ significantly from the ongoing reform of indemnity insurance. Financial authorities focused on transferring 16 million first- and second-generation policyholders to the fourth and fifth generations to reform indemnity insurance due to criticisms that the broad coverage provided by the first and second generations encourages excessive treatments. The financial authorities are also promoting a repurchase system that would provide compensation if first- and second-generation policyholders transfer to the fourth and fifth generations. Previously, there was also a system that offered a 50% discount on premiums for re-enrolling in the fourth generation.
The insurance industry reports that it is difficult to assess the situation as specific plans have not yet emerged. However, the general reaction is not negative. If policyholders delete some coverage, excessive treatments may decrease as well. It is expected that there will be little resistance from policyholders since they can save on premiums.
An insurance industry official noted, "In indemnity insurance, there are many cases where people receive treatments such as physical therapy that are not absolutely necessary. If the promise is implemented, policyholders who do not see the need for physical therapy will be able to reduce premiums instead of having it as collateral, which could help control excessive treatments."
However, it is expected that time will be needed for the promise to materialize. First, there needs to be consideration on how to specify the promise. Some have mentioned the possibility of instituting constitutional riders. A constitutional rider is a type of rider offered by insurance companies for consumer convenience that does not incur any premiums.
An insurance industry official stated, "We can consider whether to allow policyholders to set a rider for medical practices such as physical therapy or for specific diseases such as cardiovascular diseases. However, since there are too many contracts, it will not be easy to create a simple structure."