Seokyoung Kim Senior Research Fellow, Insurance Research Institute[사진=보험연구원]
Everything changes but nothing changes. This is an advertisement for the world famous luxury brand Hermes. Even if the world changes, their essence does not change and they continue to maintain the best luxury goods.
So, what is the nature of insurance? The environment surrounding the insurance industry is rapidly changing. Right away, a new accounting system and financial soundness system were put into effect this year. Due to the aging population and changes in the household structure, there is a need to develop insurance products suitable for them. What is the essence of insurance that will not change even in these changes? Is taking risk the essence of insurance? When talking regarding the role of insurance, it is often mentioned that the essence of insurance is to hold out an umbrella when it rains and to provide economic help.
However, I think the essence of insurance is love for neighbors before providing economic help. Helping each other when our neighbors are in trouble is an instinct inherent in our DNA through long evolution, and we express this as ‘neighbor love’. In the past, the insurance industry is helping with the financial pain that the remaining family will face when the head of a neighbor dies, in the name of whole life insurance, so that cancer patients who would have been desperate for cancer treatment can receive treatment with peace of mind. Since cancer insurance has been developed to provide economic help, the essence of insurance is to practice neighbor love, and therefore we think that we are practicing neighbor love without even realizing it when purchasing insurance.
Historically, insurance companies in Korea started growing in the 1960s with education insurance that provided education expenses for children, which was one of the biggest concerns of our neighbors. Since then, by selling insurance products that meet the needs of the times, such as cancer insurance that alleviates fear of cancer in the 1980s, accident insurance that relieved public anxiety due to many large-scale disasters in the 1990s, and health insurance that fits the well-being era in the 2000s, alleviated their economic hardship. Recently, long-term care insurance and dementia insurance are being sold to prepare for the aging era.
However, due to the recent increase in life expectancy, changes in the demographic structure, and aging, the need for help from family and neighbors is fundamentally changing. It has become a situation where it is no longer possible to take care of the elderly with dementia within the scope of the family, and furthermore, general individuals have become more interested in maintaining health and healthy old age. Accordingly, the role of insurance is also required to change in line with these changes. Until now, providing financial benefits in case of an accident has been the main role, but now prevention of risks by preventing accidents in advance by managing and taking care of health is required as a major role.
In fact, the elderly who are worried regarding dementia want services that provide health care to prevent dementia and care for dementia onset, rather than insurance that pays for care costs in case of dementia, and this clearly suggests the way forward for the insurance industry. In other words, it is not a risk factor, but a transition to risk prevention, which means predicting rain in advance rather than giving an umbrella when it rains.
Recent technological advances are making such predictions possible. Everything is starting to be connected with the Internet of Things, and big data analysis is making it possible to predict what will happen. Recently, courier companies are creating a world where they wait for orders in front of the customer’s door by anticipating the customer’s order through big data analysis and starting delivery before placing the order. This is what insurance companies are looking for.
However, unlike the delivery service, the regulated insurance industry is difficult to provide under the current system because the business and regulation of the insurance industry have been shaped in line with risk taking over the past few decades. For these changes in insurance, a large-scale change in laws and regulations related to the new business model of insurance companies is required.
However, even if all the laws and regulations change, even if the role of the insurance industry changes from providing umbrellas on a rainy day to alerting people that it will rain, the essence of insurance, that is, love for neighbors, will not change.