The Financial Services Commission prepared product design standards for the launch of indemnity health insurance in the first half of this year. It plans to curb incentives to overuse medical services by narrowing coverage through measures such as a cap on the out-of-pocket rate for non-severe, non-reimbursed care.
The Financial Services Commission on the 15th announced this through a notice of legislation on amendments to the Enforcement Decree of the Insurance Business Act and to the Insurance Business Supervision Regulations, along with a notice of regulatory changes.
The amendment sets product design standards for the launch of fifth-generation indemnity health insurance in the first half of this year. For severe non-reimbursed medical expenses, the annual compensation limit is set at 50 million won, and when using tertiary general hospitals and general hospitals, the out-of-pocket limit is 5 million won. For non-severe non-reimbursed medical expenses, the annual compensation limit is set at 10 million won. Detailed standards such as exclusions will be reflected through revisions to the Detailed Regulations on the Enforcement of Insurance Business Supervision. For non-severe, non-reimbursed inpatient costs, the out-of-pocket rate was raised to 50% from the current 30%, and coverage was reduced.
For reimbursed outpatient medical expenses, the out-of-pocket rate will be linked to the National Health Insurance out-of-pocket rate. For reimbursed inpatient medical expenses, the same 20% out-of-pocket rate as the current fourth-generation indemnity health insurance will apply.
The amendment also includes measures to strengthen accountability in insurance sales channels. It will mandate the establishment of internal control systems for general agencies (GA) and regulate detailed procedures to ensure compliance with internal control standards, such as setting up a branch management system under headquarters.
The amendment also introduces the basic capital solvency ratio (K-ICS) as a financial soundness standard that insurers must comply with. While easing K-ICS regulatory standards such as requirements for early redemption of insurers' subordinated bonds, it prepared a dual-track reform plan that introduces basic capital as a regulatory standard that must be mandatorily observed.
Along with this, it will expand the scope for simplifying explanations when concluding insurance contracts through telemarketing channels. It will also push to revise laws and regulations to establish order in insurance solicitation by clarifying criteria for similar contracts used in operating comparison and guidance systems to prevent improper policy replacements.
The notice of legislation and regulatory changes on the amendments to the Enforcement Decree and Supervision Regulations will run from Jan. 15 to Feb. 25. After review by the Regulatory Reform Commitee and the Ministry of Government Legislation, and approval by the Vice Minister-level meeting and the Cabinet meeting, the revisions are slated for completion in the first half of this year.