Announcement of Audit Results on the Operation of Automobile Insurance and Compensation Systems... Issues with Inflated Prices of Imported Car Parts
[Asia Economy Reporter Ryu Jeong-min] A Board of Audit and Inspection report has highlighted the need for improvements regarding the issue of expensive repair costs for high-end vehicles, noting cases where the accident-damaged vehicle bears greater compensation liability than the at-fault vehicle.
On the 27th, the Board of Audit and Inspection announced the results of its audit on the "Operation Status of Automobile Insurance and Compensation Systems."
According to the Board, an analysis of repair costs, insurance payouts, and premiums for private passenger cars under property damage liability insurance revealed that the average repair cost per automobile insurance accident was 2.5 times higher for imported cars (2.89 million KRW) compared to domestic cars (1.14 million KRW).
The Board pointed out, "There have been cases where the victim vehicle bears a greater compensation liability than the at-fault vehicle due to the high repair costs of luxury vehicles."
For example, in an accident involving a luxury vehicle with 70% fault (repair cost of 88.48 million KRW) and a regular vehicle with 30% fault (repair cost of 1.48 million KRW), the compensation amount for the at-fault luxury vehicle is 1.04 million KRW (70% × 1.48 million KRW), whereas the compensation amount for the victim vehicle is 26.54 million KRW (30% × 88.48 million KRW), approximately 26 times higher than that of the at-fault vehicle.
The Board stated, "The Financial Supervisory Service calculates property damage liability insurance premiums based solely on insurance payouts made to the opposing vehicle without considering the increase in insurance payouts caused by high repair costs for luxury vehicles, yet this practice remains unchanged." It added that it has notified the Governor of the Financial Supervisory Service to analyze factors affecting insurance payouts such as automobile repair costs and reflect them in insurance premiums, and to prepare appropriate measures accordingly.
Meanwhile, issues were also revealed in the management and supervision of automobile repair costs. Some imported car brands do not disclose parts prices or disclose them at prices lower than the selling price.
The Board reported, "In 2019, the average parts price per automobile insurance accident was about four times higher for imported cars (2.09 million KRW) than for domestic cars (520,000 KRW), and even when vehicle prices were similar, parts prices for imported cars were 2.1 to 7.2 times higher."
It added, "(For some) vehicle rear bumper cover selling prices (569,000 KRW) were confirmed to be 42.2 times the import price (13,000 KRW)."
The Board also noted, "Since appropriate labor costs for imported car repairs have never been calculated or published, insurance companies have contracted hourly labor costs (67,000 KRW) on average 2.3 times higher than those for domestic cars (29,000 KRW)." It further stated that it has notified the Minister of Land, Infrastructure and Transport to prepare measures to promote the use of alternative parts and to improve the system so that labor costs for imported car repairs can be reasonably determined.
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