Financial Authorities "Excessive Guarantee Amounts"
Fixed Payments Regardless of Injury Grade
Concerns Over Abuse in Insurance Fraud Increase
[Asia Economy Reporter Oh Hyung-gil] "Today only, the maximum coverage for Pibuchi is 5 million won. Starting tomorrow, it will be reduced to 2 million won."
‘Pibuchi’ and ‘Jabuchi’ have finally come under scrutiny. As non-life insurance companies engaged in overheated competition by launching sales marketing campaigns emphasizing the Traffic Accident Victim Injury Treatment Support Fund (Pibuchi/Gyobuchi) and Automobile Accident Injury Treatment Expense Support Fund (Jabuchi) to promote driver insurance, financial authorities have stepped in to curb this trend.
According to the insurance industry on the 12th, Samsung Fire & Marine Insurance reduced the Pibuchi limit for driver insurance from 5 million won to 2 million won starting on the 10th. DB Insurance, which had a Pibuchi coverage amount reaching 10 million won this year, lowered it to 5 million won last month and further reduced it to 2 million won this month.
This measure follows the financial authorities’ opinion delivered earlier this month to major non-life insurers that the coverage amounts were excessive to prevent overheated competition.
Pibuchi primarily supports the treatment expenses for injuries sustained by the insured in automobile accidents. Pibuchi is paid when the injury results from one of the 12 major traffic violations such as running a red light or drunk driving. It is characterized by paying a fixed amount regardless of the injury grade or the number of treatment weeks.
Jabuchi is similar to Pibuchi in that it provides injury treatment expenses, but it pays a fixed amount according to the injury grade. For example, even the lowest grade, grade 14, which includes sprains or simple bruises, receives between 300,000 and 500,000 won.
In particular, marketing has been overheated by emphasizing that compensation can be received even while driving, walking, or riding, making it possible for not only private car drivers but also commercial drivers or non-drivers to subscribe.
In fact, some agents have promoted that even a slight collision with a vehicle crossing the center line resulting in a grade 14 injury could yield 5 million won for Pibuchi and 500,000 won for Jabuchi, totaling 5.5 million won. Provocative promotions such as "You can receive insurance money just by showing a doctor’s face" have also appeared.
Driver insurance was originally created to cover legal costs arising from traffic accidents. It gained attention last year with the enforcement of the so-called ‘Minsik Law,’ which strengthened penalties for traffic accidents in school zones, but as most coverage contents became similar among insurers, competition shifted to special riders.
However, since both Pibuchi and Jabuchi pay fixed amounts, criticism has arisen that they could be exploited for insurance fraud or encourage moral hazard among subscribers. Consequently, there are concerns that increased insurance payouts by insurers could affect loss ratios.
A non-life insurance company official explained, "Compensation is provided for traffic accidents that meet specific conditions such as prosecution or suspension of indictment due to serious violations of regulations, and insurance money is not paid simply because an injury occurred in a traffic accident."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
