Lowered Premiums and Policy Revisions... Changes in Auto Insurance Starting the New Year

12 Non-Life Insurers Sequentially Lower Insurance Premiums
Insurance Terms Also Changed... Enhancing Fairness and Rationalization
Excessive Treatment Now Impossible Even for Minor Injuries

[Asia Economy Reporter Minwoo Lee] Auto insurance will undergo major changes starting next year. While major non-life insurance companies are lowering premiums, authorities are also revising the terms and conditions to prevent excessive treatment of minor injury patients and to balance fault and liability fairness.

Premiums to be reduced from next year... about 2 percentage points ↓

According to the industry on the 29th, large non-life insurers such as Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance have decided to lower auto insurance premiums by about 2% next year. The market share of large non-life insurers in auto insurance is already around 85%. In addition, mid-tier insurers such as Meritz Fire & Marine Insurance (2.5%), Lotte Insurance (2.9%), and Hanwha General Insurance (2.0%) have also confirmed premium reductions. Among the 12 companies offering auto insurance, all seven mid-to-large insurers have decided to reduce premiums. The remaining smaller insurers are also reportedly considering premium adjustments. Practically, most auto insurance premiums will be reduced next year.

Not only premiums but also compensation methods and various standards will change. The Financial Supervisory Service announced on the 26th that the revised standard auto insurance terms will be applied from January 1st next year.

Excessive treatment for minor injuries impossible... evidence required

First, the compensation criteria for minor injury patients classified as 'simple contusions' without accompanying spinal sprains or fractures will change. It is expected that excessive long-term treatment for minor injuries will no longer be possible. If the treatment period exceeds four weeks, insurance payments will be made according to the treatment period stated on the medical certificate. Previously, it was possible to receive treatment and claim insurance payments without submitting proof such as a medical certificate, with no time limit. According to the Financial Supervisory Service, there was even a case where a rear-end collision caused slight damage to the license plate with zero repair cost, yet the patient received 69 outpatient treatments over 14 months without a medical certificate and was paid 9.5 million KRW in insurance benefits.

Deliberately being admitted to a higher-class hospital room to inflate insurance claims has also become impossible. The recognition of higher-class hospital room fees will exclude clinics and only recognize hospital-level facilities. This is to prevent cases where patients are admitted to some clinics equipped only with higher-class rooms and claim expensive higher-class room fees.

Insurance payments based on fault ratio... treatment costs may be covered out-of-pocket

Fairness in fault and liability is also expected to improve. The Financial Supervisory Service plans to revise the terms so that the portion of treatment costs for minor injury patients under Bodily Injury Liability II corresponding to the insured’s own fault is covered by the insured’s own insurance (personal injury protection or automobile injury) or paid out-of-pocket. For example, if a perpetrator with an 80% fault ratio and a victim with a 20% fault ratio both receive the same minor injury assessment, and the perpetrator’s treatment cost is 5 million KRW while the victim’s is 500,000 KRW, previously the entire amount had to be paid by the other party’s insurer. Now, applying the fault ratio, the perpetrator will receive 1 million KRW (20% of 5 million KRW) and the victim 400,000 KRW (80% of 500,000 KRW) from the other party’s insurer, and the remainder must be covered by their own insurance or out-of-pocket.

Additionally, standards for repair costs, towing fees, and eco-friendly substitute vehicle fees covered by auto insurance have been established. In particular, towing costs in property damage liability are now specified in the terms, which is expected to reduce disputes between victims and insurers regarding towing fees. Standards for substitute vehicle fees and depreciation for eco-friendly vehicles such as electric cars have also been set.

A Financial Supervisory Service official explained, "Through these measures, 'insurance money leakage' will be prevented, and consumers will be able to reduce their auto insurance premium burden."