Under the Insurance Business Act, KIDI is the only organization in Korea that accumulates industry-wide insurance statistics, produces reference rates as well as experienced Mortality tables based on industry experience data. KIDI also contributes towards the healthy growth of the Korean insurance industry by providing services that review the adequacy of premium rates and reserve levels in relation to new products and policies
Reference Rate Calculation and Verification
KIDI provides support for insurance companies in the calculation of adequate and reasonable rates by providing reference rates such as industry Mortality/Morbidity tables, which are based on in-house statistical systems and industry-wide data.
Reference rates are used to assist ratemaking and reserve calculation, which in turn contribute towards setting reasonable premium rates as well as the financial soundness of insurance companies.
For life insurance, reference rates involve Mortality/Morbidity tables in regards to death, disability, hospitalization, cancer, etc. In the case of non-life insurance, reference rates are rating factors involved in the pricing of various business sectors such as Auto, Fire, Marine, Liability, Long-term insurance, etc. Reference rates are reviewed and adjusted annually for non-life and medical expense insurance, and every five years in the case of life insurance(and long-term non-life insurance), based on industry-wide experience statistics.
Also in terms of verification, KIDI established a system to verify insurance premium information offered to the public by insurance companies. Based on Article 124 of the Insurance Business Act, all insurance companies in Korea must disclose information regarding their products, including insurance premium, to the public. To ensure greater accuracy of such information on premiums and ultimately to protect insurance consumers, KIDI has worked since April 2012 to design a verification system which currently functions as a check-point before insurers disclose their information to the public.
Filing and Approval Procedure
Financial Services Commission
(Financial Super- visory Service)
1. File the reference rate and experienced mortality tables
3. Requests reference rate
4. Provide reference rate Insurance Company
Feasibility Reviews of Premiums and Reserves
Upon request from insurance companies, KIDI reviews all basic documentation required in the development of new insurance products to ensure that premium rates have been set accordingly with the insurance terms offered, and also validates various calculations including premium rates and reserve levels to verify its appropriateness.
By verifying the appropriateness of premium rates set by insurance companies from a neutral standpoint, KIDI fulfills a public service role and prevents a situation where insurance companies do not meet appropriate/adequate levels of reserves, which in turn may negatively affect the financial soundness of insurance companies.
Filing and Approval Procedure
Developing new Products
- Surrender value
Product Sales or Filing for approval
Adequacy of Rate Reviews
KIDI reviews the appropriateness of statistics used, accuracy of the data, and reasonability of mortality/morbidity table calculations carried out by insurance companies. This service plays a meaningful part in contributing towards strengthening the public’s confidence in the insurance industry.
In addition to the traditional tables, KIDI offers various mortality and morbidity calculating methodologies regarding Long-term care, Critical illness and Annuities, to assist in the development of new markets.
Rate Review Procedure
- Statistics used
Applying to Products
The Readability Test of Insurance Policies
KIDI is the acting organization that tests the readability of insurance policies as stated by the Insurance Business Act. This test is administered quarterly on both life and non-life insurance products to assess the clarity, simplicity and brevity of insurance policy clauses to help consumers gain a better understanding of the insurance products they purchase.
New Product Development and Rate-Making Services
KIDI provides services regarding new product development and rate-making upon request from insurance companies, or in response to new market demand resulting from the emergence of new risks. Recently, KIDI has been actively supporting the development of natural disaster insurance products in connection with the government’s natural disaster management policies, thereby strengthening the role insurance plays in the risk management industry. KIDI is also supporting the expansion of the insurance market by working with non-life insurance companies and regulatory bodies in the development of new insurance products related to children’s play facilities and private learning facilities.
Also, KIDI is supporting the implementation and operation of policy driven insurances led by the government for natural disaster coverage. Through such efforts, KIDI is not only contributing towards the development of new markets in regards to policy driven natural disaster relief insurances including crop insurance, flood-storm insurance and fishery disaster insurance, but also towards the effective management of government funds as well as the provision of financial stability to those working in farms and fisheries. KIDI is developing the Catastrophe Model, which will be used to upgrade the calculation of the risk rate for such natural disasters, support underwriting of insurers, assessment of damages, and provision of reserves. Its implementation is currently under process. Meanwhile, the Korean Insurance Industry has grown in the past with private insurance, but with the liberalization of the rate of commercial insurance in April 2016, there is an increasing demand for insurers to calculate commercial insurance rates for fire, marine, and liability insurance. Therefore, KIDI will support the calculation of the insurers’ own rate by expanding the reference rate calculation of commercial insurance.
Providing Underwriting Information and Merit-Demerit Rates
KIDI provides insurance companies with individual and group merit-demerit class information which is calculated based on industry-wide policy and claims data, to be used as a reference in premium calculation. This information is provided to insurance companies for Auto, Hull, Marine cargo and Workers compensation insurances as well. Since all insurance companies share the same information provided by KIDI, it is promoting the fairness of rate making as well as improving the efficiency of underwriting processes.
The Publication of Vehicle Actual Cash Value and the Calculation of Vehicle Model Rating.
KIDI publishes a quarterly Vehicle Value Table to be used by insurance companies as an actual cash value standard when calculating premium rates for physical damage coverage, and settling claim amounts in cases of physical loss. Also, KIDI calculates a vehicle model rating on a quarterly basis by assessing damageability and repairability of vehicles through crash impact test and insurance industry statistics. This service not only promotes the fair processing of automobile insurance underwriting and claims, but also helps insurers increase efficiency in their work flow.
Support for the improvement of auto insurance system
KIDI contributes to the improvement of consumer rights and the sound development of the auto insurance industry by improving the auto insurance system of the policy supervisory authorities, such as the establishment of special rates for high-priced repair vehicles, contract policy improvement on car-rental payment standards.