South Korean financial authorities are launching a fifth-generation indemnity insurance product on May 6 to curb excessive medical utilization [1].
The shift represents a strategic move by regulators to stabilize the insurance market by prioritizing essential care over elective treatments. By increasing the cost for non-essential services, the government aims to lower premium burdens for the general population of policyholders [1].
The new product focuses on strengthening coverage for severe diseases, including cancer, heart disease, cerebrovascular diseases, and rare incurable illnesses [1]. It also introduces new benefits for pregnancy, childbirth, and developmental disabilities [1]. For those hospitalized at higher-level or general hospitals, the annual out-of-pocket maximum is set at 5 million won [1]. Costs exceeding this limit will be covered by the indemnity insurance [1].
To prevent the over-utilization of medical services, the authorities are reducing coverage for non-severe, non-reimbursable treatments. The coverage limit for these specific treatments will drop from 50 million won to 10 million won [1]. Additionally, the self-burden rate for these services will increase from 30% to 50% [1].
"The core of the fifth-generation indemnity insurance being released is to suppress the excessive use of non-essential treatments and strengthen the coverage of essential treatments," said reporter Kim Se-ho of YTN News [1].
The restructuring aims to ensure that the insurance system remains sustainable while protecting those with the highest medical needs. "The fifth-generation indemnity insurance, which strengthens coverage for severe diseases with high treatment costs and reduces non-severe non-reimbursable coverage, will be released tomorrow," said a YTN News anchor [1].
“The core of the fifth-generation indemnity insurance being released is to suppress the excessive use of non-essential treatments”
This policy shift indicates a transition toward a 'value-based' insurance model in South Korea. By sharply reducing limits on non-essential treatments and raising the self-burden rate, the government is attempting to decouple indemnity insurance from elective medical shopping. This should theoretically reduce the systemic inflation of medical costs and prevent the spiral of premium hikes that often plague indemnity products.
