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Social Insurance Scheme (SIS) - Introduction to Korea's social insurance scheme.

Definition of  social insurance scheme?

Social insurance scheme refers to a socioeconomic program using mechanisms and techniques of insurances in order to fulfill national social policies.

The purpose of the scheme is to realize health & income security for people through providing against their social risks using insurance mechanisms and techniques.

Those social risks, including diseases, disabilities, old age, unemployment, death, etc., cause a great deal of economic difficulties and substantial instabilities to not only people themselves but also their dependents.
In this sense, the scheme can be defined as an income security program to economically secure a stable life for people by identifying and providing against social risks to come.

In Korea, there are 4 major social insurance schemes (“SISs”) : workers’ compensation insurance (“WCI”) against work-related accidents; health insurance (“HI”) (or disability insurance (“DI”)) against diseases and injuries; pension insurance (“PI”) against serious disability, death, old age, etc.; and finally, employment (“EI”) against unemployment:

4 Major SIS's - PI(Old age, disability, death, etc.), HI(Diseases & injuries), WCI(Work-related accidents ), EI(Unemployment)

Comparison between social insurance and private insurance

Social solidarity and mandatoriness are characteristics of social insurance. The following shows the comparison between social insurance and private insurance :

Comparison between social insurance and private insurance
Item Social insurance Private insurance
Purpose To realize basic livelihood security & medical security To meet individual-based insurance needs
Mandatorily or voluntarily covered Mandatorily Voluntarily
Shared responsibility for the vulnerable Governmental or social responsibilities for the vulnerable Neither governmental nor social responsibilities for the vulnerable
Entitlement to due benefits Legally guaranteed Contractually guaranteed
Monopolistic or competitive Monopolized by the Government or government organizations Competitive
Who-pays principle Everybody-pays principle Mainly, beneficiary-pays principle
Premium billing Pay-as-you-earn Varying depending on individual insurance needs
Premium rating Mainly, flat rate Mainly, income-indexed flat rate
Premium level At most premium level corresponding to risk factor Experience-based
Selection of risks to be insured Not required to select risks to be insured Required to select risks to be insured
Benefit level Uniformly paid Contribution-based
Inflation-indexation Inflation-indexed Mainly, not inflation-indexed
Scope of coverage Bodily injury liability Bodily injury liability & property damage liability
Collectively or individually insured Collective Individual
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