Ahead of the launch of the fifth-generation indemnity health insurance on the 6th of this month, Lee Dong-yeop, Director of the Financial Services Commission's insurance division, said on the 4th, "It is impossible to accurately predict how many people will sign up for the fifth generation," adding, "With 800,000 people a year canceling first- and second-generation indemnity policies, we believe that if we offer a discount benefit when converting contracts, policyholders who canceled their existing products will be able to switch to the fifth generation."
The fifth-generation indemnity product is being launched to address premium hikes caused by excessive use of nonessential medical services. It lowers the annual coverage limit for non-severe, non-reimbursable care from 50 million won to 10 million won and raises the coinsurance rate from 30% (fourth generation) to 50%. However, if initial indemnity policyholders choose to switch to a fifth-generation product, they will receive a 50% premium discount for three years.
The Financial Services Commission (FSC) decided to offer premium discounts instead of cash payments when switching to the fifth generation to encourage long-term contracts. The Director said, "We thought that giving cash to subscribers to induce a switch to the fifth generation could create liquidity problems for insurers, so we settled on cutting premiums in half for three years."
The Director said, "For the fifth generation, initial premiums are low, so there is a possibility that the loss ratio will rise. Going forward, along with premium adjustments, we plan to work with the Ministry of Health and Welfare to implement improvements to curb excessive use of non-reimbursable medical services."