South Korea to Revamp Insurance System with Focus on Overseas Residents and Auto Insurance Fraud

South Korea is set to implement significant changes to its insurance system in 2026, addressing issues related to long-term overseas residents, auto insurance fraud, and excessive coverage for serious illnesses. The Financial Supervisory Service (FSS) recently announced plans to improve the “life-oriented insurance system,” aiming for greater fairness and efficiency.

Easing Burden for Long-Term Overseas Residents

Currently, South Korean residents working abroad for extended periods continue to pay domestic health insurance premiums, even though they may not be able to utilize domestic healthcare facilities. The FSS is considering a shift to allow for the suspension of these premiums from the moment a resident begins their overseas assignment, rather than requiring a cumbersome refund process upon their return. This change would alleviate a financial burden and streamline the process for those living and working abroad.

A task force, including representatives from the insurance industry, will be formed to discuss and finalize the specific details of this policy change.

Combating Auto Insurance Fraud

The FSS is also targeting fraudulent activity within the auto insurance sector, specifically addressing instances where individuals receive disproportionately large payouts for minor injuries – often referred to as “Nylon patients.” A new procedure will be introduced to review the necessity of long-term treatment for patients with minor conditions who have been receiving care for over eight weeks.

Preparing for Autonomous Vehicles

Recognizing the evolving automotive landscape, the FSS is analyzing car insurance terms and conditions in major international markets, such as the United States and China, to prepare for the commercialization of autonomous vehicles like robotaxis. This includes examining how insurance will be applied in the event of accidents involving self-driving cars in Korea.

Addressing Excessive Coverage for Serious Diseases

The FSS plans to increase its oversight of insurance products offering extensive coverage for serious diseases, such as cancer. Currently, the FSS primarily manages and supervises coverage for mild diseases and injuries. Expanding this oversight to include serious illnesses aims to protect consumers from being lured by expensive products with inflated coverage amounts and ultimately paying excessive premiums.

Strengthening Insurance Supervision

The International Association of Insurance Supervisors (IAIS) plays a crucial role in setting global standards for insurance supervision, with a focus on fair, safe, and stable insurance markets. The IAIS Roadmap 2026-2027 identifies key risks and trends, including private credit investments, geoeconomic fragmentation, and the adoption of artificial intelligence, as supervisory priorities.

These changes reflect a broader effort to modernize and strengthen the South Korean insurance system, ensuring it remains responsive to the needs of its citizens and the evolving global landscape.