Financial Sustainability of Social Insurance: The Case of Korean Workers’ Compensation Insurance and Possibility of Triple Moral Hazard

Jung Hongjoo (), Kim Changseob () and Lim Soyoung ()
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Jung Hongjoo: SKKU School of Business, Seoul, Korea
Kim Changseob: Korean Academy of Insurance, Seoul, Korea
Lim Soyoung: 13148 Assistant Professor, Waseda University , 1 Chome-104 Totsukamachi, Shinjuku City, Tokyo 169-8050, Japan

Asia-Pacific Journal of Risk and Insurance, 2024, vol. 18, issue 2, 157-174

Abstract: This study examines the economic stability of Korean Workers’ Compensation Insurance (WCI), highlighting the system’s vulnerability to triple moral hazard. Korean WCI features more generous worker compensation, lower employer premiums, and more active government involvement in accident prevention in addition to a higher industrial accident rate, compared to the system in Germany and Japan. The negotiation process of the WCI among workers, employers, and insurance managers often prioritizes short-term benefits, undermining long-term financial health. Workers seek greater compensation, employers push for lower premiums, and insurance managers may prioritize collective interests, exacerbating the system’s economic instability. Over recent years, applications for occupational disease recognition have surged, and premium rates have decreased, indicating increasing strain. To mitigate these issues, the study proposes enhancing transparency and rationality, involving non-political experts in decision-making, and clearly defining the government’s role in managing WCI. These measures aim to balance stakeholder interests and ensure the WCI system’s sustainability for future generations.

Keywords: Workers’ Compensation Insurance (WCI); fund sustainability; legal reserve; triple moral hazard (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1515/apjri-2024-0029

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