FSS runs premium simulations for policyholders switching to 5th-generation coverage

A woman in her 60s would see monthly premiums drop from 176,982 won to 21,620 won

Contract-conversion discount set to launch in November

'Frequent non-covered users should weigh the trade-offs,' regulator warns

[Getty Images Bank]
[Getty Images Bank]

A woman in her 60s who enrolled in a first-generation indemnity health insurance plan before March 2013 could save about 5.59 million won ($4,160) over three years by switching to a fifth-generation plan once a new contract-conversion discount launches next month. However, the fifth-generation product significantly reduces coverage for non-reimbursed medical expenses, so policyholders who use healthcare frequently should weigh the premium savings against the reduced benefits before making the switch.

According to simulation data the Financial Supervisory Service submitted Monday to the office of Rep. Min Byeong-deok of the Democratic Party of Korea, a member of the National Assembly's Political Affairs Committee, a woman in her 60s holding a first-generation indemnity plan pays an average monthly premium of 176,982 won. The fifth-generation premium for the same age group stands at 43,241 won — 75.6 percent lower. With the contract-conversion discount applied, the monthly premium falls further to 21,620 won, an 87.8 percent reduction from the current rate. The figures are based on the average published premiums of six non-life insurers: Meritz Fire & Marine Insurance, Samsung Fire, Hyundai Marine & Fire Insurance, KB Insurance, DB Insurance and Heungkuk Fire & Marine Insurance.

The contract-conversion discount cuts fifth-generation premiums by 50 percent for three years for policyholders who enrolled before March 2013 — that is, first- and second-generation plan holders who have no renewal cycle — when they switch to the fifth generation. The discount is set to launch in November. Applying it in a straightforward calculation, a woman in her 60s would save 5.59 million won over three years. A man in his 60s would see his monthly premium drop from 136,139 won to 20,966 won, saving 4.15 million won over three years, while a woman in her 50s would go from 138,381 won to 17,239 won per month, saving 4.36 million won. Second-generation policyholders in the same female-60s bracket would also benefit, with monthly premiums falling from 126,773 won to 21,620 won — a saving of 3.79 million won over three years.

The savings were substantial across all age groups. For first-generation policyholders switching to the fifth generation, the premium reduction rate reached 68 to 78 percent before the discount is applied. A man in his 20s would see his monthly premium fall from 32,683 won to 9,730 won, while a woman in her 40s would go from 98,393 won to 23,431 won.

Third- and fourth-generation policyholders, however, are not eligible for the contract-conversion discount, so the benefit is comparatively modest for them. The premium reduction rate when switching from the fourth to the fifth generation ranged from 14 to 23 percent — 14.2 percent for men in their 50s (33,417 won to 28,683 won), 19.9 percent for men in their 40s (22,195 won to 17,777 won), and 22.7 percent for women in their 60s (55,945 won to 43,241 won).

The lower premiums, however, come with reduced coverage. The fifth-generation plan cuts the annual benefit cap for non-serious, non-reimbursed expenses under the second special rider from 50 million won to 10 million won and raises the co-payment rate from 30 to 50 percent. Musculoskeletal physical therapy such as manual therapy, extracorporeal shock wave treatment, non-reimbursed injectable drugs and unlisted new medical technologies are no longer covered under the non-serious, non-reimbursed benefit. As a result, switching may only be advantageous for policyholders with low healthcare usage; for those who regularly receive manual therapy or non-reimbursed injections, the benefit is expected to be limited.

The FSS said in its submission that "existing indemnity insurance policyholders can decide whether to switch to the fifth generation based on their individual circumstances, taking into account the premiums they have paid in the past, the insurance benefits they have received, and their likely future healthcare needs."

Even after the discount period ends, fifth-generation premiums remain far lower than first-generation rates. For a woman in her 60s, the standard fifth-generation premium of 43,241 won is roughly one-quarter of the current first-generation rate. Premiums may vary, however, depending on the timing and the insurer. The contract-conversion discount will run for six months from November, after which authorities will review whether to extend it. Policyholders who apply for the discount may still withdraw their application within six months.


won@heraldcorp.com