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Review of the Compulsory Storm and Flood Insurance and Policy Implications

  • Journal of Insurance and Finance
  • 2008, 19(2), pp.77-107
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management

Shin Dong Ho 1

1상명대학교

Accredited

ABSTRACT

The current penetration rate of storm and flood insurance in Korea is very low. The main reasons for low penetration rates are summarised: a limit of compulsory insurance, a lack of public knowledge of the benefits of insurance, the traditional role of the government in ad-hoc compensating for disaster losses, and a difficulty of the control of moral hazard to the consignment insurance company. The purpose of this study was to investigate some prerequisites for introducing the compulsory storm and flood insurance in Korea and to make a suggestions for the Korean government. The results are; First, it is necessary to decree a new compulsory clause(article) in the storm and flood insurance law. Second, it should be stopped the ad-hoc free compensating for disaster losses from government simultaneously by a introduction of compulsory storm and flood insurance. Third, government should establish a special non profit organization, which directly operates the storm and flood insurance. It should be provided a unlimited reinsurance guarantee from government. Finally, It should be agreed that the compulsory storm and flood insurance brings a fundamental issue as like compulsory social insurances based on public interests do.

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