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Inside North Korea

Insurance in N. Korea


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Everyone is exposed to various kinds of dangers. Those who own cash and jewelry may have their possessions stolen at any time, while drivers are not free from accidents. Unexpected diseases like cancer may result in high medical bills and even death. People find it necessary to prepare against any accidents or disasters, and that’s what insurance is for. 

We can’t help but wonder if there is insurance in North Korea and if so, what it is like. Today, we’ll learn about North Korean insurance from Professor Chung Eun-chan at the Institute for Unification Education. 

North Korea’s Insurance Law stipulates that insurance is a system of compensation for damage whereby public funds are created and used to make compensation for damage caused to persons or property due to natural disasters or accidents. Based on the law, relevant officials discuss how to compensate people or property for damage, how to raise public funds and how to actually use the funds. 

North Korea has no specific health insurance, like in South Korea, as the socialist state, in principle provides people with medical treatment free of charge. But North Korea has something similar to the industrial accident compensation insurance. 

In the socialist North, everything is owned by the state. Insurance in North Korea is more like a state-run damage compensation system aimed at swiftly providing funds needed to restore damaged state facilities, rather than protecting individuals or private properties. All properties owned by the state and cooperative groups and even crops of collective farms must be insured. 

Insurance Law states that insurance business shall be undertaken by insurance companies that obtain the license from the central insurance administration organ. But insurance business has been conducted exclusively by a state-run insurance company called the Korea National Insurance Corporation in Pyongyang. It is in charge of everything about the nation’s insurance management and has hundreds of branches in nine provinces, major cities and smaller counties. 

There is only one insurance company in North Korea, namely, the Korea National Insurance Corporation. It was formerly a private insurance agency established in 1946. It provides insurance products to organizations, enterprises and residents through its branches across the nation. 

In the North, insurance is classified into personal insurance and property insurance. Workers between the ages of 16 and 65 are covered by personal insurance. If insured people have accidents, fall sick or lose their jobs, personal insurance covers the loss of labor, life or property. In the case of property insurance, insurance money is paid for property damage but the premiums will not be returned at maturity if there hasn’t been any accident. 

Basically, both personal and property insurance are state-owned, and most North Korean residents are hardly aware of their insurance policies.  

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North Korea claims that it is a tax-free country. But in reality, people pay taxes without knowing it. For example, the state takes away 1 percent of their salary as insurance premiums to raise insurance funds. But it is not indicated on their pay slips, and many workers are not aware of it. Even if they are, they don’t know about the insurance benefits very well. Of course, those who suffer from disasters or industrial accidents are entitled to insurance coverage. But in many cases, it is not until they get coverage that they recognize the insurance system. 

North Korean citizens do not know much about their insurance policies or terms because insurance contracts are not issued. But they must pay insurance premiums. A certain proportion of their salaries are automatically deducted as personal insurance premiums, and the Korea National Insurance Corporation pays the net profit of insurance into the treasury bureau at the central bank. For North Korean people, insurance is, therefore a sort of tax that is deducted from their salaries. 

When people suffer the loss of labor, life or property, the state supports them through its budget. That’s how North Korea’s insurance system works. While the North uses the insurance system as a means of increasing state revenues, the nation also uses international insurance for the same purpose. 

Even outside the nation, North Korea has used insurance as a means of securing funds to maintain its regime. A North Korean ship that had foreign marine insurance had an accident, while traveling from the U.K. It turned out that the ship caused the accident deliberately to receive a large payout. Later, North Korea made a similar attempt again but the insurance fraud was discovered after the insurance company looked into the accident. As a result, North Korea became an international embarrassment. 

The North also makes foreign companies within the nation take out insurance, through which it collects a considerable amount of money. With that purpose in mind, North Korea continues to expand the insurance market. 

Like other countries, North Korea carries international insurance policies to cover the loss of life and property that may occur in the course of transactions with foreign countries. But the North is notoriously known for having made money from a British insurance company by intentionally causing an accident. 

North Korea compels foreign diplomatic offices as well as foreign investors and tourists in the nation to have personal and property insurance. The purpose is the same— to earn foreign currency. 

There is insurance unique to the North Korean regime, that is, “nuclear insurance.” The North has a long history of nuclear weapons development. The nation uses this nuclear insurance as a negotiation card to receive economic assistance from the outside world. 

North Korea’s insurance market reached 1.5 billion US dollars in 2016, posting an annual growth of 4.6 percent on average for the last ten years. While North Korean insurance is different from those in other countries, prospects for its insurance market are bright, considering its growth rate and potential. 

If and when North Korea resolves its nuclear issue through negotiations with the U.S. and gets sanctions relief, an increasing number of countries will be eager to invest in North Korea. Of course, the North will require foreign investors to get insurance. It is easy to imagine that more development projects in North Korea will lead to the creation of various insurance products. 

As private markets have spread in North Korea, individuals have accumulated wealth. A new insurance market for covering damages to household properties could be created as well. Similar examples can be found in socialist states that introduced a market economy. In the early period of adopting the policy of reform and openness, those countries experienced remarkable economic development and a massive increase in individual assets and saw the insurance market expand. 

In a report last year, the Korea Insurance Research Institute said that it would be necessary to pay attention to North Korea’s insurance market. Although it may come with great risk, the market is expected to grow fast once it is open. North Korea’s commitment to denuclearization is critical to the success of its insurance market, which is called the goose that lays golden eggs. 

(Next week, we’ll talk about heating facilities in North Korea.)

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