FSC chair announces insurance reforms
People that have chronic diseases like diabetes or high blood pressure will be eligible to subscribe to non-life insurance policies if they have no record of being treated, starting next year.
Additionally, the government will not only be lowering insurance subscriptions on non-life insurance policies, but also helping to monitor insurance policies that have become dormant or matured so that policy subscribers can collect their claims.
The Financial Services Commission on Monday announced its plan to reform the financial industry with a focus on consumers.
“Until now there have been efforts to improve the irrational systems in the financial industry from field evaluations to reforming past practices,” FSC Chairman Choi Jong-ku said on Monday. “However, these were mostly concentrated on the financial companies, improving the system for consumers as a result.”
Choi emphasized that the government will pursue financial policies that concentrate on the consumers, not the financial companies, as the first priority.
One such plan is creating non-life medical insurance policies by April next year that will allow those with chronic diseases to subscribe.
This means that even those with such disease histories will be eligible to subscribe to such policies if they haven’t been admitted or undergone surgery in the last two years, been treated for those illnesses in the last seven days or taken medication in the last 30 days.
Under the current regulations, policy subscription is limited to those who have not been treated for the disease in the last five years. As a result, many in the older generation have had trouble subscribing to such policies.
Easing medical bills, especially for older people, was one of President Moon Jae-in’s key campaign promises.
However, the amount that patients with chronic diseases will have to pay on their medical bills, even when subscribing to such insurance policies, will be about 30 percent of the total cost. Patients without chronic diseases generally pay 10 to 20 percent.
Insurance payments on non-life insurance policies will be lowered as the government plans to expand the categories that are guaranteed by national health insurance.
The government plans to allow insurance policy subscribers to collect on insurance claims that have been cancelled or become dormant.
According to the government last year, 7.6 trillion won ($6.7 billion) of insurance claims were not collected. Insurance payments that were not collected after the subscriber cancelled their insurance policies accounted for 5.1 trillion won, dormant insurance policies came in second with 1.3 trillion won, while those that matured but haven’t been collected amounted to 1.2 trillion won.
The Korea Life Insurance Association and the General Insurance Association of Korea will be developing a system next year where insurance subscribers can check if they haven’t collected their insurance.
Non-life medical insurance isn’t the only area that will be reformed to benefit clients.
The government is also making changes to loans including credit cards.
The process of issuing credit cards for housewives, whose income is hard to prove on paper, will be simplified.
The simplified process will be introduced in December.
The financial authorities will also be working on lowering the financial burden on overdue loans. This includes changing the way interest rates on overdue loans are set.
The FSC pointed out that the annual spread of 6 to 9 percent on overdue loans is high when compared to other countries. Because of the higher spread, the interest burden on debtors whose loans are overdue goes up to a maximum 15 percent.
In the case of the United States, the spread is between 3 and 6 percent while in Germany it is around 2.5 percent.
The government estimated 1.35 million debtors are expected to benefit if the spread is lowered.
BY LEE HO-JEONG [email@example.com]