"Sell Insurance Guaranteeing Serious Accident Punishment Act"... Insurance Companies Face Deepening Concerns

Following Increasing Demands for Related Insurance Sales
Joint Development Discussed but Launch Delayed
High Risk Rate and Contradiction to Legal Intent

[Asia Economy Reporter Oh Hyung-gil] "When doing corporate sales, many small and medium-sized enterprise owners often ask if there is insurance that guarantees coverage under the Serious Accidents Punishment Act. This shows how much burden they feel from the newly implemented law. Considering the role of insurance in reducing risk factors in business activities, related insurance is necessary, but it is more complicated than expected, causing concern."

As the enforcement of the Serious Accidents Punishment Act, which holds business owners and management responsible if a worker dies while working at an industrial site, approaches, the property and casualty insurance industry is facing difficulties. Since the law not only punishes specific individuals but also imposes severe penalties, it has emerged as an unprecedented management risk, increasing demands for related insurance products. However, there are concerns that the insurance risk rate could be significant, and some argue that creating such insurance contradicts the law’s intent.

According to the insurance industry on the 25th, since last year, some property and casualty insurers have been leading discussions to develop a "Serious Accidents Punishment Insurance" (tentative name). It is reported that during this process, a specific timeline was even mentioned to start selling the insurance in line with the law’s enforcement date on the 27th.

A representative from a small to medium-sized property and casualty insurer explained, "There was high demand for new corporate insurance because if companies face strong penalties such as imprisonment or punitive damages for violating the law, the continuity of business activities could be at risk. Since the law is being enforced for the first time, it was burdensome for a single insurer to monopolize the product development and sales, so we have been discussing joint development."

The Serious Accidents Punishment Act stipulates that if a serious accident occurs?such as a death or two or more injuries requiring treatment for over six months?and the business owner or management fails to fulfill safety management obligations, they will face criminal penalties including imprisonment and bear punitive damages up to five times the civil damages.

Many companies expressed concerns even before the law’s enforcement, and existing products like Directors and Officers Liability Insurance or Environmental Pollution Liability Insurance do not cover the Serious Accidents Punishment Act, so there was a judgment that there was room for product development. The driver insurance that covered criminal settlement fees or fines related to the "Min-sik Act" implemented in 2020 was a successful case.

However, the launch of Serious Accidents Punishment Insurance was indefinitely postponed. There were concerns that the coverage might contradict the law’s purpose, and that the risk rate would be significant if insurers directly covered punitive damages. The law aims to encourage companies to strengthen safety management, and if insurers cover losses from legal violations, it could lead to negligence in management obligations, making it unsuitable.

Moreover, following the recent collapse accident of a Hyundai Development Company apartment in Gwangju, which is expected to cause losses in the trillions of won, related discussions have effectively been halted.

An industry insider said, "Driver insurance covers losses due to negligence or carelessness, whereas the Serious Accidents Punishment Act presumes intentional failure to take safety measures, so there is a difference between the two products. The consensus was reached not to rush the launch because it is inappropriate for insurance to cover losses of intentional offenders."