November 28, 2024

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The South Korean pet insurance market has been expected to gain traction amid a growing pet population in the country. However, it will take more time for the market to mature, according to industry sources.

According to the Korea Credit Information Service, the number of pet owners who have pet insurance plans reached around 55,000 as of October last year, accounting for only 0.8 percent of 7.2 million pet owners in the country.

The figure is much lower than other foreign countries such as Sweden and the UK, where around 40 percent and 20 percent of pets are insured.

One of the main reasons behind the low rate is because the coverage of the types of pet care services still remain limited.

“Most of the existing pet insurance plans are cost-sharing ones, in which companies give a limited amount of insurance money, and pet owners are to pay out the rest,” a source from the insurance industry told The Korea Herald.

“Insurance companies cannot introduce pet insurance plans with bigger payouts because companies cannot estimate the average costs involving different types of medical services for pets,” the source added.

When designing a coverage plan, an insurer needs to know the cost estimate for certain medical services. However, because there are wide gaps between medical costs that different hospitals charge on pet care services, it is “structurally” difficult for insurance companies to launch pet insurance plans with bigger payouts.

Due to such difficulty, insurance companies have requested the recently launched government-led task force on pet insurance to introduce a fee-for-service model for pet care services.

A fee-for-service model is a traditional health care model, in which health care providers and hospitals are reimbursed based on the number of services and procedures with fixed fees. In South Korea, the majority of health care services in the public health system are based on this model.

“At least if the government makes hospitals disclose fees for pet care services, insurance companies may be able to accumulate statistical data needed to launch more pet insurances,” another source from a local insurance firm said on condition of anonymity.

Insurance firms have been introducing some pet insurance plans under the government’s apparent pressure, yet payouts are limited as insurance firms cannot raise the maximum amount of money an insurance company will pay for a covered claim, the source added.

Reintroducing a fee-for-service model for pet care services was also one of President Yoon Suk Yeol’s policy pledges made during his presidential campaign.

The task force was launched last year in line with Yoon's pledge to nurture the pet insurance market here.

The Korean Veterinary Medical Association, however, expressed concerns about fixing fees for pet care services, which are not insured.

"It is questionable if the government will be able to intervene and fix the fees for the medical services that are not part of the public health system," an official from the association said.

“The government scrapped its fee-for-service model for pet care services back in 1999. Over the last 20 years, pet care services developed and became more sophisticated. Reintroducing a fee-for-service model now, without proper preparations, is not recommended."

An official from the Ministry of Agriculture, Food and Rural Affairs also said it will be difficult for the government to set fixed fees for pet care services.

The Financial Services Commission, which is leading the task force, agreed that introducing a fee-for-service may be too early at the moment, and the country lacks the basic infrastructure for the pet insurance market.

An official from the commission and its task force will first focus on listing out pet diseases and related medical services to provide better access to data involving pet care services, before considering the introduction of a fee-for-service model.

The state-led task force will also encourage pet registration and simplify insurance billing processes as well.

By Shim Woo-hyun (ws@heraldcorp.com)