Consumer Group Recruiting Plaintiffs for Joint Lawsuit on 'Deductible Refund'
"May Result in Disadvantages for Many Insurance Policyholders"
[Asia Economy Reporter Oh Hyung-gil] Whether the refund of the automobile insurance deductible, which requires drivers to bear part of the repair costs in the event of a car accident, will be subject to legal judgment is finally being decided. While the insurance industry maintains its stance that refunds are not applicable, it is closely monitoring the outcome of the lawsuit.
The automobile insurance deductible is a system where drivers who have subscribed to the own-damage special contract bear 20% of the repair costs within the range of 200,000 to 500,000 KRW when repairing their vehicles after an accident. It was introduced at the end of February 2011 to prevent moral hazards such as excessive repair cost claims.
Consumer groups claim that non-life insurance companies should refund the 'own-damage deductible' paid by consumers from the subrogation funds received from the opposing party's insurer during traffic accident settlements, but have instead withheld these refunds.
The Financial Consumers Federation (Chairman Jo Yeon-haeng) is recruiting plaintiffs for a joint lawsuit seeking refunds of the own-damage deductible on repair costs for accident vehicles from insurance companies that have not returned these amounts to consumers, until the 29th of next month.
Previously, in the Supreme Court fire insurance ruling (2014Da46211), it was stated that "in non-life insurance, the insurer can exercise subrogation rights only within the scope remaining after the consumer has been compensated first."
This applies the legal principle under Article 682 of the Commercial Act that "when an insurer claims subrogation from the opposing insurer, the insured's compensation for damages must take precedence."
Own-Damage Insurance Premiums Calculated on the Premise of Bearing Deductibles
However, the insurance industry holds the position that the debate over deductibles in fire insurance and automobile insurance are distinctly different.
An insurance industry official explained, "In the case of fire insurance, the compensation ratio is determined based on the percentage of the insured amount, etc. Since automobile insurance does not compensate based on the damage ratio, the concept of ratio itself does not exist, making the insurance systems completely different."
They also argue that since deductibles were introduced by regulatory authorities to prevent moral hazards such as intentional accidents, they cannot be subject to refunds.
According to a report titled "Issues Regarding Refunds of Own-Damage Deductibles" released by the Korea Insurance Research Institute, "Deductibles are intended to reduce premiums and prevent moral hazards," and "if deductibles are considered refundable, it could result in unfavorable outcomes for many policyholders."
In particular, if own-damage deductibles are to be refunded, the final damage sharing results would differ between cases where the own-damage insurance is processed first for the same accident and cases where it is not. If deductibles are refunded for the first processing, other general accidents would be discriminated against.
An official from a non-life insurance company explained, "The Supreme Court precedent relates to fire insurance cases without separate deductibles," and added, "The own-damage deductible in automobile insurance is already agreed upon by the insured, so it differs from the 'remaining damage amount.'"
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