Expanding Microinsurance for Low-Income Households via Private Sector Support
Low-income groups are more vulnerable to shocks from illness, death, and disasters. Despite needing insurance the most, their enrollment rates are low due to economic constraints. For example,[1] while 90.8% of households earning more than KRW 60 million ($43,170) a year hold insurance plans, only 26.9% of households earning less than KRW 12 million ($8,633) and 48.7% of households earning between KRW 24 million ($17,267) and KRW 36 million ($25,901) have insurance. When asked why they are not enrolled, 88.7% of households with annual incomes below KRW 12 million and 71.4% of those earning between KRW 24 million and KRW 36 million replied that they cannot afford it.
Table 1: Enrolled for Private Life Insurance vs. Not Enrolled Due to Economic Reasons
| Household Annual Income | Enrolled for Private Life Insurance | Not Enrolled Due to Economic Reasons |
|---|---|---|
| Less than KRW 12 million |
26.9 |
88.7 |
| KRW 12-24 million |
48.7 |
71.4 |
| KRW 24–36 million |
61.0 |
58.7 |
| KRW 36–48 million |
83.2 |
57.3 |
| KRW 48–60 million |
80.8 |
47.8 |
| KRW 60 million and over |
90.8 |
55.0 |
Source: 2021 Life Insurance Propensity Survey of Korea Life Insurance Association.
Most current policy supports for low-income groups are direct financial aids through loans and subsidies. Indirect supports, such as insurance, would help low-income individuals remain economically stable during illness, death, and disasters.
KIFA, in partnership with five private insurance companies, runs microinsurance programs for low-income households and vulnerable groups. However, the scope of beneficiaries and coverage is limited due to budget constraints.[3] The budget relies on returns from dormant insurance funds, amounting to about KRW 5 billion per year on average. In 2022, KIFA could pay full insurance premiums amounting to KRW 4.26 million for about 19,000 contracts, only 0.06% of the entire financial aid given by KIFA. The budget for microinsurance was only 0.27% of the total budget for KIFA programs in 2023.
Currently, those eligible for microinsurance include children aged 13 and under, dependents in single-parent families receiving child benefits, users of products by KIFA or partner organizations (e.g., rehabilitation support fund, self-supporting funds for the vulnerable), and some individuals in credit recovery. KIFA provides only two microinsurance products: 1) medical insurance for single-parent families and 2) self-supporting insurance for low-income households. Moreover, only three out of 300 personnel at KIFA are assigned to microinsurance as incidental work, with no one taking full responsibility for the program.
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