By Yoon Ja-young
Staff Reporter
Industrial accident compensation insurance, currently under a government monopoly, should be open to private insurance companies, the Korea Insurance Development Institute said Tuesday.
The institute said in a report that the insurance might face serious a shortage of funds in the future. As of 2007, it had a 3 trillion won shortage in its reserves.
It also pointed out that the difference in risk between industries and businesses isn't reflected in the insurance premium. According to the insurance think tank, the industry with highest accident rate is 76 times higher than that of the industry with the smallest rate. Among businesses, the highest is 6.6 times higher than the lowest.
However, the difference is not reflected in insurance premiums. It means subscribers with low accident rates are paying higher insurance premiums than they should.
State-run insurance is too lenient in determining the seriousness of an accident, the think tank said. This causes a moral hazard, according to the institute, as people stay in hospital longer than they should, which adds to the financial burden of the insurance operator. In 2007, the victims of industrial accidents were hospitalized for an average of 68 days, compared with an average of 39 days recorded in 1995.
The institute suggested introducing the principle of competition in the market, allowing private insurance companies to do business in the industrial accident insurance sector.
Businesses are also pressured by the increasing burden of accident insurance premiums. The premium stood at 4.4 trillion won in 2007, three times more than 1.5 trillion won premium they paid in 1998.
The insurance think tank added that private insurance companies are likely to invest in the prevention of industrial accidents when they enter the market. This will pull down the accident rate, and thus slash the insurance premium burden on businesses that adhere to safety principles.