66% of Last Year's Subscribers
"Increase in High-End Imported Cars Causes Burden"
[Asia Economy Reporter Oh Hyung-gil] The amount of property damage liability coverage, which compensates for damages to the other party's vehicle in car accidents, has been steadily increasing. Last year, more than six out of ten automobile insurance subscribers were found to have high-value property damage liability coverage of 300 million KRW or more. This is interpreted as a burden due to the increasing number of imported cars worth over 100 million KRW.
According to the Korea Insurance Development Institute on the 20th, among the 17.149 million vehicles with automobile insurance property damage liability coverage as of October last year, 11.415 million vehicles had coverage of 300 million KRW or more.
The number of vehicles with coverage of 300 million KRW or more increased sharply from 7.879 million in 2018 to 9.812 million in 2019, and exceeded 10 million for the first time last year. The proportion of vehicles with coverage of 300 million KRW or more also jumped from 48.3% in 2018 to 58.8% in 2019, and approached 66.6% last year.
The number of vehicles with coverage under 100 million KRW slightly decreased from 618,000 in 2018 to 612,000 in 2019, then increased to 705,000 last year. In particular, the number of vehicles with coverage between 100 million KRW and 300 million KRW significantly decreased from 7.803 million in 2018 to 6.268 million in 2019, and further to 5.029 million last year.
According to the Automobile Damage Compensation Guarantee Act, the mandatory minimum property damage liability coverage for automobile insurance is 20 million KRW, but subscribers can choose coverage amounts ranging from 30 million KRW to 1 billion KRW.
Since the mandatory coverage amount is lower than the average car price, most subscribers have historically set coverage amounts higher than the mandatory minimum, but recently, high-value coverage of 300 million KRW or more has become noticeably prominent.
The insurance industry explains that the increase in high-value property damage liability coverage is related to the rise in expensive vehicles such as imported cars.
The number of registered imported cars has been rapidly increasing recently. In 2019, imported cars accounted for 2.41 million of the total registered vehicles, a 73.3% increase from 1.39 million in 2015 over five years. The cumulative number of newly registered imported passenger cars last year was 274,859, a 12.3% increase from the previous year.
If the compensation amount for property damage is insufficient in an accident involving an expensive vehicle, the driver must compensate the difference personally. For example, if a driver causes a collision with an imported car with an 80:20 fault ratio, resulting in total property damage of 60 million KRW, and the driver has coverage of 30 million KRW, the insurance company will compensate 30 million KRW. The remaining 18 million KRW must be compensated by the driver.
The fact that increasing the property damage liability coverage amount does not significantly increase the insurance premium also encourages high-value subscriptions. For example, with Samsung Fire & Marine Direct, the premium for 20 million KRW coverage is 124,170 KRW, while 30 million KRW coverage costs 176,200 KRW, an increase of about 50,000 KRW. In contrast, the premium for 100 million KRW coverage is 191,000 KRW, and for 300 million KRW coverage, it is 191,530 KRW, an increase of only 530 KRW.
An insurance industry official explained, "Since repair costs for accidents involving expensive imported cars are two to three times higher than for domestic cars, high-value property damage coverage is necessary," adding, "However, accidents requiring compensation of several hundred million KRW are rare, so the insurance premiums do not differ significantly."
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