The South Korean government will set up a joint panel with property and casualty insurers and Korean medicine hospitals to draw up treatment standards for traffic accident patients and ways to settle disputes. The aim is to bring the parties together to agree on reasonable rules after persistent clashes over excessive treatment and insurance claims.
The Ministry of Health and Welfare will soon launch the panel with the Ministry of Land, Infrastructure and Transport and the insurance and Korean medicine industries, according to the office of Rep. Baek Jong-heon of the People Power Party, a member of the National Assembly's Health and Welfare Committee, on the 19th. The panel, formed to set appropriate standards for Korean medicine treatment and resolve disputes, is expected to include the General Insurance Association of Korea, major property and casualty insurers, the Association of Korean Medicine and the Korean Medicine Hospital Association.
The government is moving to form the panel because conflicts over auto insurance claims have intensified. The auto insurance business posted a loss of 184.8 billion won ($128 million) in the first half of this year, a swing of 215 billion won from a year earlier, according to the Financial Supervisory Service. That means payouts exceeded premium income. Traffic accidents fell about 4.5% from a year earlier, yet the loss ratio rose 1.6 percentage points to 84.9% over the same period. "Excessive Korean medicine treatment is the main culprit behind the worsening loss ratio," an official in the property and casualty insurance industry said. "Hospitalization is being overused even for patients with minor injuries, and that is where the leakage occurs."
Korean medicine is taking up a rapidly growing share of auto insurance medical costs. Payments for Korean medicine treatment of injured parties reached 630.7 billion won last year, 5.1 times the 124.7 billion won recorded in 2015. Korean medicine's share of total treatment payments for injured parties also rose to 89.1% last year from 64.4% in 2015. Financial regulators introduced an eight-week rule last month to curb prolonged treatment of patients with minor injuries, but concerns remain high over workarounds such as "diagnosis switching," in which injury grades are raised to sidestep the rule.
Insurers whose profitability has reached its limit are responding with criminal complaints and lawsuits. Samsung Fire & Marine Insurance has filed civil and criminal suits against 52 Korean medicine hospitals, and Jaseng Hospital of Korean Medicine was searched in July by the financial crime investigation unit of the Seoul Metropolitan Police Agency's Metropolitan Investigation Bureau. The hospital is suspected of indiscriminately providing traffic accident patients with pre-made herbal medicine as if it had been individually prescribed, obtaining tens of billions of won in insurance payouts. The financial crime investigation unit is also said to be investigating other Korean medicine hospitals.
Against this backdrop, the government plans to step in as a mediator to set appropriate treatment standards and principles for resolving disputes. Officials judge that reasonable standards are needed quickly because leakage of insurance payouts caused by excessive treatment ultimately hurts policyholders through higher premiums. "We agree on the need to form and operate a panel to set appropriate standards for Korean medicine treatment and to work out ways to resolve disputes," an official at the Ministry of Health and Welfare said. "We will consult with relevant agencies and organizations on running the panel, in order to protect traffic accident patients' right to receive treatment and to ensure that appropriate medical services are provided."
The insurance industry also expects the move could help end widespread moral hazard and correct claims practices. The General Insurance Association of Korea has already said it will join the panel and take part in the discussions. "It is welcome that the two industries are meeting to set reasonable standards," an official at a major property and casualty insurer said. "The key, though, will be whether Korean medicine hospitals voluntarily comply once an agreement is reached."