'Inducing Excessive Treatment'... Major treatment cost insurance sales to be halted starting next month

Starting next month, the sale of insurance policies covering cancer and cerebrovascular and cardiovascular diseases that induce excessive medical treatment will be discontinued. The Financial Supervisory Service has intervened, citing that these treatment cost insurance policies provide coverage beyond necessary, encouraging over-treatment and consumer moral hazard. In effect, this suspension is expected to significantly impact the insurance companies' operations.

According to the insurance industry on the 24th, major property and life insurance companies will cease the sale of new proportional insurance policies for cancer, brain, and cardiovascular diseases starting next month. This is a response to the Financial Supervisory Service summoning the head of the third insurance department at insurance companies on the 21st to point out issues with related products.

A high-ranking official at the Financial Supervisory Service stated, "Like indemnity insurance, there is a potential to induce excessive treatment. If all medical expenses, including out-of-pocket costs, are covered by insurance, it will be difficult to prevent moral hazard," and added, "The products currently being sold provide coverage regardless of income, which could negatively impact the health insurance finances." There are concerns that this could be irrationally managed in a way that guarantees excessive expenses beyond income limits, which is inconsistent with the intended purpose.

Insurance companies announced that they will only sell major treatment cost insurance through sales channels until the end of this month. An industry insider said, "Since they pay 9 million won out of 10 million won spent on medical expenses and 90 million won out of 100 million won, the occurrence of medical expenses may increase," and added, "The impact on the industry due to the suspension of sales will be limited."

The authorities believe that although products that guarantee treatment costs for cancer, brain, and cardiovascular diseases are among the main offerings, the wide variety of products means there will be no major issues in the field. An official from the Financial Supervisory Service explained, "Since health insurance also has a system to reimburse excessive expenses relative to an individual's income, a social safety net is in place."

It is reported that authorities emphasized strengthening internal controls over insurers' discontinued marketing. This is because discontinued marketing could flourish as product sales are halted next month. Insurance companies anticipate that this will negatively impact their sales performance in the short term. An official from a major insurance company stated, "If the number of products handled through sales channels decreases, it will have a negative impact on short-term profits," and added, "While it is not something insurers are immediately worried about, ultimately it will weaken sales and also affect performance."

<Source: Edaily>