FSS: "Promote Use of Certified Quality Parts for Minor Car Accidents with Scratches and Dents"

Source: Financial Supervisory Service

[Asia Economy Reporter Changhwan Lee] The Financial Supervisory Service announced on the 20th that it will promote the widespread use of relatively inexpensive certified quality parts, which have similar quality, instead of the expensive OEM (Original Equipment Manufacturer) parts currently used in minor traffic accidents.

Certified quality parts are parts that have the same or similar performance and quality as the parts of cars produced by automobile manufacturers but are cheaper. They are certified after being reviewed by certification bodies designated by the Ministry of Land, Infrastructure and Transport to ensure consumers can use them with confidence.

Unlike foreign countries, the domestic automobile repair parts market has not activated certified quality parts, resulting in a fixed high-cost repair practice centered on OEM parts.

According to the Financial Supervisory Service, among the 7.5 trillion won paid for property damage and own damage insurance in automobile insurance last year, parts costs accounted for 42.7%, and fluctuations in parts costs contributed to the rise in insurance premiums.

The insurance industry introduced a special contract in February 2018 that refunds part of the OEM parts cost when certified quality parts are used for repairs in own damage automobile insurance accidents, but usage was minimal due to low awareness of certified quality parts.

Accordingly, the Financial Supervisory Service plans to promote the replacement of minor damage (Type 3) vehicles with certified quality parts. However, if certified quality parts are not available, restoration repairs will be applied as before.

The Financial Supervisory Service expects that if certified quality parts become widespread, repair costs will decrease due to a chain effect such as a drop in OEM parts prices, thereby reducing the insurance premium burden on the public.

The Financial Supervisory Service announced that it will revise the standard terms and conditions within this year to reflect the system improvement and plans to fully implement it for automobile insurance contracts starting from the effective date of liability next year.