Nine in 10 households have insurance — but only half of the vulnerable do

South Korea's insurance market is saturated — yet the low-income and elderly populations who need coverage most remain outside its reach. The government and the insurance industry have subsidized premiums and even offered free enrollment, but because these programs rely on direct funding, coverage disappears the moment the money runs out. That structural flaw is driving calls for inclusive insurance — coverage designed for vulnerable groups — to evolve from one-off handouts into a self-sustaining market.

The Korea Insurance Research Institute held a seminar Thursday afternoon at its conference room in Yeouido, Seoul, on approaches and challenges for introducing Korean-style inclusive insurance as a new safety net for an ultra-risk society. Inclusive insurance refers to products designed to extend meaningful coverage to groups left out of the mainstream market, including low-income households, the elderly and small-business owners.

Presentations at the seminar showed that while household insurance enrollment has surpassed 90 percent, the private insurance enrollment rate among those earning under 20 million won ($13,500) a year stands at just 52.1 percent. Among people in their 70s and older — the age group with the highest medical expenses — the private health insurance enrollment rate drops sharply to 28.7 percent.

The gap is likely to widen. Structural shifts — the climate crisis, the spread of platform-based gig work and rapid population aging — are creating risks that did not exist before, and vulnerable groups bear the brunt first. When extreme heat halts construction, day laborers lose that day's income entirely. The commercial motorcycle insurance that delivery riders need costs six times more than a standard household policy, leaving enrollment at just 26 percent. One in five elderly people living alone has no access to care.

The market cannot fill these gaps on its own. Insurers calculate premiums using historical accident data, but emerging risks such as climate disasters have no such statistical record, making underwriters reluctant to take them on. Demand-side conditions are equally difficult: people with unstable incomes struggle to afford premiums, and even those who manage to enroll often give up on filing claims because the process is too complicated.

The government and the industry have not been idle. In March, the government unveiled a five-year inclusive finance plan for the insurance sector worth about 2 trillion won. Life and non-life insurers have also pooled 30 billion won in a mutual-aid fund, distributing free coverage to vulnerable groups through local government competitions. But the approach itself is the problem, said Lee Jae-yeon, a research fellow at the Korea Insurance Research Institute who presented at the seminar. "The response so far has been limited to direct funding — a structure in which coverage stops the moment support stops," he said.

Leaving it entirely to the private sector is not the answer either. Disability-specific insurance products that insurers voluntarily introduced serve as a cautionary example: because they were unprofitable, agents stopped selling them, and new contracts all but disappeared — falling from 67 in 2018 to zero after 2022.

Other countries are combining technology and human networks to find solutions. The Philippines converted its rural pawnshop network into insurance sales points and built a mobile app that lets users enroll in three taps. India deployed female insurance agents in villages across the country and rolled out an ultra-low-cost package bundling life, health and property coverage for about 1,500 rupees a year. The model is the same in both cases: digital tools drive down costs while people on the ground build trust.

Son Seong-dong, deputy director of the RMI Insurance Management Research Institute, drew on these overseas examples to propose a "Korean-style hybrid model." He said inclusive insurance should go beyond a safety net that merely breaks a fall — it should act as a trampoline that helps vulnerable people bounce back to everyday life.

The approach would be tailored by generation. Younger people comfortable with apps would be reached through micro-insurance embedded in platforms such as online food delivery services, while older people who prefer face-to-face interaction would be served through post office networks and insurance agents. To encourage supply, Son proposed easing capital regulation requirements for insurers that sell inclusive products and lowering the entry barrier for small, specialized insurers — similar to Japan's model of companies that sell only small-value, short-term coverage.

To oversee the effort, he proposed establishing an "inclusive insurance foundation" with joint participation from the government and the industry. The idea is to link government welfare data with insurers to pinpoint coverage gaps precisely, and to provide shared IT infrastructure to smaller insurers with limited capital so they can enter the market.

"In an ultra-risk society where the climate crisis and rapid aging reinforce each other, the growing risks cannot be managed by public-sector efforts alone," said Kim Heon-su, president of the Korea Insurance Research Institute. "Inclusive insurance must be developed not as a one-off support measure but as a sustainable safety net."