Insurers' 'No-Accident Policy Conversion System' Execution Rate at 17.6%... Financial Supervisory Service Implements System Reforms

From Annual to Ongoing Notifications
Improvements to Prevent Mistaking Guidance for Spam Messages

The 'No-Accident Policy Conversion System,' which maintains coverage and discounts premiums if no hospitalization, surgery, or diagnosis of serious disease occurs after signing up for health insurance, had an execution rate of 17.6%. In order to improve this, the Financial Supervisory Service has initiated reforms, such as changing the notification system from once a year to a continuous notification process.

Financial Supervisory Service Headquarters, Yeouido, Seoul. Financial Supervisory Service

According to the Financial Supervisory Service on October 5, as of the end of May, there were 10.81 million contracts under this system issued by 9 life insurers and 9 non-life insurers. However, out of 6.57 million contracts that had been in force for over a year since signing, only 1.16 million contracts (17.6%) had received premium discounts.

If subscribers to health insurance with the no-accident policy conversion system do not experience hospitalization or surgery for a certain period, they can receive a premium discount while retaining the same coverage. Premiums are initially set based on the insured’s health status at the time of subscription, but if the insured remains healthy for a year after joining, this is reflected in the premium starting from one year after enrollment.

The Financial Supervisory Service determined that eligible subscribers were not receiving benefits if they hadn’t been hospitalized or undergone surgery, which prompted the recent policy improvements.

The system was redesigned so contract holders no longer have to visit branches during a specific application period, calculate their accident-free period, and select a discount rate (conversion type) themselves. The plan going forward is for insurers to confirm contract holders’ intentions and automatically apply the most favorable conversion type for them.

First, the number of notifications will be increased. According to the Financial Supervisory Service, some insurers only provided notifications once a year, and only prior to the contract anniversary, failing to notify on the actual anniversary date itself. Going forward, insurers will implement a continuous notification system and continue to notify even after the contract anniversary date, with regular check-ins to confirm applications and conversions.

The notification methods will also be improved. Previously, guidance was primarily sent via messaging apps (e.g., text notifications), but moving forward, notifications will be sent using multiple channels such as phone calls (using voice bots), postal mail, and more.

To prevent users mistaking these notifications for spam or advertisements, the system has been revamped to specify that the notification is regarding premium discounts in the subject line and the first sentence, and to clearly state premium types and amounts both before and after conversion.

Application channels have also expanded beyond in-person visits and face-to-face applications through insurance agents, to include non-face-to-face digital options such as mobile apps (notification messages, phone calls).

In addition, insurers themselves will now proactively find the most favorable conversion type (discount rate) first. Previously, contract holders had to manually select and apply for their own conversion type, sometimes resulting in less than the optimal discount—such as only getting a one-year discount despite being accident-free for two years. Going forward, once the insurer confirms the contract holder’s intention, the company will check both the accident history and the holder’s statements to automatically apply the best possible option.

Insurers will immediately update their work procedures and plan to complete enhancements to their IT systems and insurance policies by January next year.

The Financial Supervisory Service explained that this system reform is a case of improvement and rectification of detrimental factors to consumer rights identified during preemptive consumer protection inspections of the insurance sector, which have been carried out following the recent organizational restructuring, covering the entire product lifecycle.

A representative from the Financial Supervisory Service stated, "We will continue to make every effort to enhance consumer protection and benefits through preemptive consumer protection-focused supervision and inspections in the future."

This content was produced with the assistance of AI translation services.