Insurance Regulatory Changes in 2022
The Korean insurance industry is faced with an evolving regulatory landscape in 2022, and it is essential for insurers to keep up with the pace of regulatory developments. In response, insurance companies are embracing themselves for a set of regulatory changes that affect the insurance market. Here is a rundown of the latest regulatory changes:
Compulsory liability insurance for medical device manufacturers or importers
Companies who manufacture or import medical devices are required to have liability insurance that covers losses arising from the malfunctioning of their products. This new mandatory insurance requirement becomes effective in July 2022 when a revision to the Medical Devices Act takes effect. The compulsory liability insurance coverage will help protect medical device manufacturers and importers from financial compensation risks when one of their products turns out defective or causes harm to those who use such devices. Medical equipment and devices are used every day in hospitals and other medical facilities, and lawsuits resulting from faulty devices could bring a huge amount of financial losses to manufacturers or other related parties. With sufficient product liability insurance coverage, they will be protected against lawsuits and claims filed by harmed patients as a result of malfunctioning medical devices.
Improving the structure of insurance products with no or low surrender value
Insurers are required to establish best practice standards to improve the way they calculate the surrender rate when designing insurance products with no or low surrender value. The requirement has been introduced in January 2022 in order to tackle mis-selling practices involving no or low surrender value insurance products and prevent such products from undermining the solvency of insurers. Their sales recently jumped, with the number of new policies soaring from 304,000 in 2016 to 4,435,000 in 2020. An insurer is now mandated to make sure that the adequacy of its surrender rate calculation is validated through the Korea Insurance Development Institute (KIDI) or an external actuarial firm when it develops insurance products with no or low surrender value. In addition, the KIDI is required to support insurers with data sharing and analysis with regard to surrender rates so that they can develop better insurance products.
(Source: Financial Services Commission)
Allowing insurers to engage in the electronic prepayment business
Insurance companies in Korea are allowed to concurrently engage in the electronic prepayment business as of February 2022 following an amendment to the Enforcement Decree of the Insurance Business Act. In addition to their core insurance business operations, they may provide electronic prepayment services through which they can offer points to their customers as rewards for completing certain health care activities. Consumers may use the points they have earned to pay insurance premiums or buy health products.
Raising the monetary cap of health care devices that can be provided by insurers
Since December 2021, the maximum value of health care devices that insurers can provide to their policyholders has been raised to KRW 200,000 from KRW 100,000 under the insurance supervisor’s revised guidelines for the development and distribution of insurance products that offer rewards for healthy behaviors. The guidelines are designed to support the local insurance industry with its efforts to develop and sell new insurance products in step with health care innovations. Insurers are now allowed to provide health care devices of varying value to the policyholders of the same health insurance that rewards healthy behaviors depending on the premium amounts.