Korea's Industrial Accident Compensation Insurance System

Concept of Industrial Accident Compensation Insurance System

According to the Labor Standards Act, when a worker is injured or becomes ill for reasons related to work, his/her employer must assume the reponsibility for compensation. Under the Industrial Accident Compensation Insurance System (hereinafter referred to as the “IACIS”), however, the government assumes the responsibility of compensation. Insured business owners are exempted from their respective compensation reponsibilities through the payment of insurance premiums, from which the government provides compensation to injured workers directly.

The Industrial Accident Compensation Insurance (IACI) of Korea was established with the purpose of protecting workers from industrial accidents and diseases. The Industrial Accident Compensation Insurance Act was established in 1963 and enacted in July 1964.

The IACI aims to facilitate sound business management for employers by allowing them to share the burden of compensatory expenses arising from industrial accidents with the society, and offers a sure and fast compensation for employees with the state bearing the responsibility of compensating workers for industrial injuries and diseases.

The main activities of the IACI are twofold; industrial accident prevention, and payment of insurance benefits, rehabilitation and welfare programs for injured workers. The IACI is a bicameral system with its activities divided between two agencies as follows:

ㅇ Korea Labor Welfare Corporation : Workers□ compensation, rehabilitation, and welfareprogram

ㅇ Korea Industrial Safety and Health Agency: Industrial Accident Prevention Program

1. Scope of Application of the Industrial Accident Compensation Insurance Act

o All businesses employing workers

- This Act applies to all workers regardless of type of labor

- This Act also applies to foreign businesses and foreign workers

- If an employer wants to be insured, overseas-dispatched workers can be insured with the approval of the Korea Labor Welfare Corporation.

A business owner should inform the KLWC of his/her participation in IACIS within 14 days from the commencement of a business.

o Businesses excluded from the application

- This Act does not apply to forestry, fishery, hunting and agricultural businesses for which fewer than five workers are employed.

- This Act does not apply to small-scale construction projects, domestic works, etc.

♠ Even the above-mentioned businesses can sign up for the IACIS by obtaining prior approval from the Korea Labor Welfare Corporation (KLWC).

2. Application Unit of the Industrial Accident Compensation Insurance

o In principle, the Industrial Accident Compensation Insurance System applies at workplace-level, regarding business located in the same place  as one unit.

- In case one business consists of several workplaces located in different places,(for instance, branch offices, outlying agencies, or factories separated geographically from their headquarters)each workplace shall be separately insured.

- However, in case the workplaces even located in different places have the same owner and engage in the same category of business, these workplaces are subject to the blanket application of the same insurance relations for the convenience of insurance procedure.

3. Categories of Insurance Benefits

If a worker covered by IACIS is injured or contracts an occupational disease requiring four or more consecutive days of medical treatment, or dies, insurance benefits will be paid after the submission of an application by the concerned worker or his/her surviving family members.

Medical Treatment(Care) Benefit	Covers all medical expenses for treatment, surgery, hospitalization, andnursing incurred by work-related injuries or diseases.
Shutdown Benefits (Wage Replacement Benefits)	Shutdown Benefit(Wage Replacement Benefit) is designed to partially make up for wages while a worker is recovering from workrelated injury or disease. The benefit covers up to 70% of the worker□s regular wages.
Permanent(Partial) Disabilities Compensation	A worker suffering from permanent disabilities due to work-related injury or disease will be awarded a compensation to make up for potential wage loss based on the amount of physical function lost. The compensation is paid in lump sum or as annuity.

Death(Survivor) Benefit	In the case of death of a worker due to work-related injury or disease, the dependants of the deceased (spouse, children, etc.) will receive the Death Benefit in a lump sum payment or annuity(50% annuity, rest 50% annuity or lump sum).
Nursing Benefits	When workers injured due to work-related accidents need to receive constant and frequent nursing service because they are not able to lead an everyday life on their own even after receiving medical care, they are given payment as nursing benefits.
Injury-Disease Compensation Annuity	If a worker does not recover from the work-related injury or disease after 2 years of treatment, the amount of wage lost due to the injury or disease will be made up for in the form of a pension.
Funeral Expenses	In the case of death, 120 days□ wage will be paid to the surviving family.

4. Insurance Premium

An insured business owner should report and pay the annual insurance premium to the local branch of the KLWC within 70 days from the beginning of the ploicy year or the commencement of a business if he/she started the business mid-year.

♠ More specifically, the business owner should report and pay to the KLWC the estimated premium (the estimated total wages to be paid to employees for the current year X the premium rate) each policy year. And in the following policy year, the business owner should report the finalized premium (total wages actually paid to employees in the previous year X the premium rate) and settle the difference. In other words, the business owner should report and pay the estimated premium for the current year, and report the finalized premium for the previous year and settle the difference within 70 days from the beginning of each policy year.

A. Insurance premium rate

o The premium rate will be announced every year by the Minister of Labor in such publications as its official newsletter.

o According to business category(59 business categories in 2003) classified depending on its risks of accidents and similarity in terms of economic activities, the premium rates are determined on the basis of the ratio of the total insurance benefits to the total wages for the past three years, taking into consideration related administrative costs.

o Average insurance premium rate for  the year 2003 is 13.4/1000, with a minimum rate of 4/1,000 for financial and insurance business and a maximum rate of 346/1,000 for lumbering business.

B. Calculation of premium rate

o The amount of insurance premium is calculated by multiplying the presumed amount of the total wages which the employer would pay all workers in the concerned workplace for one year by the premium rates applicable to the same category of business.

Premiun = yearly total wages × premiun rate

o Employers bear the whole amount of insurance premium.

o In case of industrial accident compensation insurance, only when workers  take out  industrial accident compensation insurance in their own countries, they are entitled to be insured in other countries.

- Korea's industrial accident compensation insurance system makes it optional for overseas-dispatched workers to be insured. For this reason, if overseas-dispatched workers are excluded from the insurance coverage through an mutual agreement, it could cause problems in compensating the workers for industrial accident.

5. Rehabilitation & Welfare Programs for Injured Workers

IACI Treatment Centers and Facilities	- General Treatment Centers : Inchon Choongang General Hospital, Taebaek Choongang General Hospital, Changwon General Hospital, Daejeon Choongang General Hospital, Ansan Choongang General Hospital, Suncheon General Hospital - Treatment Centers for pneumoconiosis : Donghae General Hospital, Jeongseon General Hospital - Spinal Cord Injury Patients Treatment Centers : Gyeonggi Rehabilitation Hospital - Rehabilitation Centers : Inchon Choongang General Hospital(Industrial Rehabilitation Center), Ansan Rehabilitation Training School, Gwangju Rehabilitation Training School, Korea Orthopedics & Rehabilitation Engineering Center
Rehabilitation Programs	- Supplementary Support for Rehabilitation Aids - Rehabilitation Training - Subsidy for Vocational Training - Subsidy for Rehabilitation Sports - Rehabilitation Counseling - Rent Subsidy for Starting New Businesses
Welfare Programs	- Scholarship or Student Loan Program for Injured Workers and Children of Injured Workers, - Loan Programs for Livelihood Support for Injured Workers, Family Welfare Programs, etc.