Skin Injury and Self-Injury Claims Rise... Financial Authorities Curb Overheated Marketing of Driver Insurance (Comprehensive)

Financial Authorities "Excessive Guarantee Amount"
Fixed Payment Regardless of Injury Grade
Concerns Over Abuse in Insurance Fraud Increase

[Asia Economy Reporter Oh Hyung-gil] "Today only, the maximum coverage for Pibuchi (traffic accident injury treatment support fund) is 5 million KRW. Starting tomorrow, it will be reduced to 2 million KRW."

'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 KRW to 2 million KRW starting on the 10th. DB Insurance, which had a Pibuchi coverage amount reaching 10 million KRW this year, lowered it to 5 million KRW last month and further reduced it to 2 million KRW this month. Other non-life insurers have also issued guidelines to lower the Pibuchi coverage limits.

This measure follows the financial authorities' communication earlier this month to major non-life insurers, expressing concerns 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 insured is injured due to one of the 12 major violations.

The 12 major violations include running a red light, crossing the center line, speeding over the limit by more than 20 km/h, illegal lane cutting, violating railroad crossing rules, failing to protect pedestrians at crosswalks, unlicensed driving, drunk driving, invading sidewalks, failing to prevent passenger falls, violating safe driving obligations in child protection zones, and inadequate securing of cargo on vehicles.

In the event of such major violation accidents, a fixed amount is paid regardless of the injury grade or the number of days of treatment prescribed.

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 for the lowest grade injuries such as sprains or simple bruises (grade 14), it pays between 300,000 and 500,000 KRW.

In particular, marketing has 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 and non-drivers to subscribe.

In fact, some agents have promoted that even a slight collision with a vehicle crossing the center line, resulting in only a grade 14 injury assessment, can yield a combined payout of 5.5 million KRW at once?5 million KRW for Pibuchi and 500,000 KRW for Jabuchi. 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 child protection 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 could affect loss ratios for insurers.

Especially as non-life insurers point to excessive medical treatment for minor accidents as the main cause of rising loss ratios in automobile insurance, paying fixed insurance money for minor accidents in driver insurance is inconsistent.

An official from a non-life insurer explained, "This compensation applies to traffic accidents meeting specific conditions such as prosecution or suspension of indictment due to serious legal violations, and insurance money is not paid simply because the insured was injured in a traffic accident."