Insurance rules to loosen
The Financial Services Commission, the nation’s top decision-making body in finance, announced a set of measures to boost the competitiveness of insurance companies in the country, including lifting the ceiling on the premiums of private health insurances.
Approximately 30 million people - more than half of Korea’s entire population - currently have health insurance from private companies, according to the government data.
But insurance companies can’t afford to make their payments due to the government’s restrictions on raising premiums on private health programs over the past five years.
Those restrictions have led to a surge in deficits. In recent years, the nation’s eight largest insurance companies paid more to their clients than their revenue, with the losses-to-revenue ratio reaching 138 percent in 2014.
The ceiling on health insurance premiums will be completely removed in 2018, but the government decided to ease it gradually - by 30 percent in 2016 and 35 percent in 2017 - due to concerns over a price hike if it was immediately lifted.
“There is a possibility of a hike in insurance premiums that has been barred so far,” said Do Gyu-sang, an FSC official, at a briefing.
“But in a long-term perspective, the lifting will stimulate competition in the market and the price will eventually stabilize.”
Chang Nam-sik, chairman of the General Insurance Association of Korea, said tougher competition will make insurance companies refrain from increasing premiums.
“If competition gets fierce among insurance companies, it would be more difficult for them to raise premiums,” Chang told reporters.
“I believe profits generated because of the relaxed regulations will go to consumers.”
Another measure announced by the FSC included launching an “online supermarket for insurances,” a website where potential buyers can compare various insurance plans and search for the exact one they need. The site will open in November.
The government will promote some cheaper insurance plans on the homepage, as well as encourage insurance companies to develop a product tailor-made for online sale, the FSC said.
Insurance companies said they welcomed the relaxation on regulations, but it could be bad news for some smaller companies.
“Insurance will become diverse under the lifted restrictions on premiums,” said a manager at a large-size insurance company.
“But we don’t expect a hike in premiums, because if we did that in a free market, consumers might turn their backs on us.”
A manager from a medium-sized insurance company said the online insurance shopping mall might hurt more than it helps.
“It could be an opportunity for us, a medium-size company, to promote our products at such a website,” he said by phone.
“But if premiums are standardized, consumers would select insurance only based on their brands, and that would give the advantage to large, well-known companies.
“Small- or medium-sized companies might have to concentrate on cheap insurance, while larger ones can focus on high-premium products.”
BY KIM HEE-JIN [firstname.lastname@example.org]
with the Korea JoongAng Daily
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