Overview
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 data on reference rates such as industry Mortality/Morbidity tables, which are based on industry wide data and in-house statistical systems. This allows insurance companies to calculate adequate and reasonable rates for policy holders.
Reference rates are used to assist ratemaking and reserve calculation, which in turn contribute to setting reasonable premium rates as well as ensuring the financial soundness of insurance companies.
Reference rates for life insurance includes Mortality/Morbidity tables on death, disability, hospitalization, cancer, and other insurance related statistics. In the case of non-life insurance, reference rates are rate factors that are involved in pricing of each business sector such as auto, fire, marine, liability, long term insurance, etc. Reference rates are annually reviewed and adjusted for non-life and medical expense insurance, and in case of life insurance (and long-term non-life insurance), reviewed and adjusted every five years based on industry-wide statistics.
Filing and Approval Procedure
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Financial Services Commission
(Financial Super- visory Service)
1. File the reference rate and experienced mortality tables
2. Approves
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KIDI
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3. Requests reference rate
4. Provide reference rate Insurance Company
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
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Insurance company
Developing new Products
Requests
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KIDI
Feasibility Review
- Premium
- Reserve
- Surrender value
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Provides
Insurance company
Product Sales or Filing for approval
Adequacy of Rate Reviews
KIDI is responsible for reviewing the statistical data used to calculate the rate and data, more specifically, reasonability of Mortality and Morbidity table calculation carried out by insurance companies.
By reviewing calculations, KIDI increase the public's confidence in the insurance industry. In addition to traditional tables such as mortality and morbidity rates, KIDI offers a variety of data calculation methodologies regarding long-term care, critical illness and annuities all to assist the growth and development of new markets.
Rate Review Procedure
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Insurance company
Making rates
Requests
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KIDI
Reviewing Rates
- Statistics used
- Data
- Calculation
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Provides
Insurance company
Applying to Products
The Readability Test of Insurance Policies
KIDI is the acting organization that is responsible for assessing the legibility of insurance policies, as required by the Insurance Business Act. This process is enacted semi-annually on both life and nonlife 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. From 2021, in addition to insurance policy, insurance product description is also to be included in the evaluation.
New Product Development and Ratemaking Services
KIDI provides services to support new product development and rate-making, either on demand or in response to emerging market risks.
These efforts contribute not only to the development of new markets for government sponsored natural disaster relief insurance?including agriculture, flood and storm, and aquaculture insurance?but also to the effective management of government funds.
KIDI has played an active role in the development of government-subsidized insurance by creating products that cover natural disasters in alignment with national disaster management policies. This strengthens the role of insurers in risk management and enhances financial stability for those in the agricultural and aquacultural industries. While Korea’s insurance industry has historically been driven by personal lines, demandfor commercial lines premium ratemaking has steadily increased since deregulation in April 2016. KIDI continues to monitor market needs and is providing more reference rates for commercial lines than ever before.
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.