The ageing process is pronounced in South Korea. In six years' time, about one in four people will be among "the olds" and life expectancy is among the highest. Population aged 60+ will rise by 53% from 7.5 million in 2010 (or 15.6% of total population in 2010) to 11.5 million in 2020 (or 22.7% of total population by that time), according to United Nations' projection. The number of "very olds", or population aged 80+, will grow even faster and double from about 1 million in 2010 to about 2 million by 2020.
Rising demand for medical care services by the old-aged or financing adequately for healthcare expenditure will be a key challenge to government and individuals. Until now, the majority of health expenses has been financed by the government. In 2011, South Korean government borne 57.3% share of the total healthcare expenses, according to data from World Health Organisation. Rising demand for medical care services by the old-aged is putting significant stress on public finance.
That said, many procedures and conditions are not fully covered by national health insurance and individuals have to use their own financial assets (out-of-pocket expenses) to fund the expense. In 2011, individual out-of-pocket expenses accounted for 32.9% of the medical funding in South Korea. Many South Koreans are increasingly worrying about financing of their medical expenditure, as advancements in medical technologies, increasing demand for customised treatments and medical inflation are working to inflate the cost of treatment going forward. More importantly, with longer retirements and progressively less government and employer involvement in the post-working stage of the lifecycle, individuals will increasingly need to provide for their own old-age financial healthcare requirements.
Funding longer lives is a pressing issue. More Korean starts to see the benefits of private insurance solutions. Between 2003 and 2011, health insurance premiums more than doubled in South Korea. Yet, the use of private insurance is still relatively limited, which accounted for only 6% of country's total healthcare expense in 2011. Part of the reasons is due to limited availability of insurance products. Insurance companies should expand product options to cater for the fast growing elderly segment.
I look forward to discussing this hot issue at the Swiss Re 150 Seoul event on March 27 when we'll be celebrating 150 years in the industry, our joint successes with clients and partners in South Korea, and discussing how we can work together to solve some of South Korea's most burning issues. Leave comments below or follow live reporting on twitter @SwissRe or #SwissRe150. See event details here: http://150.swissre.com/events/150/seoul_en.html
Category: Funding longer lives: Health/medicine, Long-term care, Longevity risk
Location: South Korea