Despite Fewer Car Repairs Due to COVID-19... Repair Cost Claims Increase

Increase in Repair Costs Including Labor Cost Hikes

[Asia Economy Reporter Oh Hyung-gil] Although the number of automobile insurance repair cost claims decreased last year due to the COVID-19 pandemic, the total claimed amount increased due to factors such as labor cost hikes.

On the 20th, the Korea Insurance Development Institute analyzed automobile insurance repair cost claims using the Automobile Repair Cost Online Service System (AOS) and found that the number of claims by repair shops was 2,851,953, a decrease of 11.2% compared to the previous year.

The institute interpreted that after the government implemented social distancing measures, the increase in remote work and the reduction in travel and outings led to decreased automobile usage, which in turn resulted in fewer accidents.

However, the average repair cost claimed per automobile insurance case was 765,064 KRW, an increase of 5.8% compared to the previous year. The average annual growth rate over the past three years reached 7.4%.

Status of Auto Insurance Repair Claims and Claim Amounts (Source: Korea Insurance Development Institute)

This is due to vehicles becoming more premium with advanced safety devices and the use of new materials, as well as an increase in the use of waterborne paints, which are more expensive than conventional solvent-based paints. In particular, the hourly labor cost rose from 30,499 KRW in 2019 to 30,952 KRW last year, contributing to the rise in repair costs.

The institute expects that with the spread of COVID-19 vaccinations, automobile usage may increase, leading to a rise in automobile insurance repair cost claims this year compared to last year.

An official from the institute stated, "The improvement effect on accident rates due to COVID-19 is diminishing, and with continuous cost increases, it will be difficult to sustain improvements in automobile insurance loss ratios. Efforts to reduce business expenses through video consultations and damage assessments using artificial intelligence (AI) technology, as well as the establishment of reasonable standards for repair cost calculation between the insurance and repair industries, are required."