One in Five People Enroll in Driver Insurance, Coverage Reduced Starting July

20% Additional Deductible Expected
Subscribers Reach 5 Million... Concerns Over Insurance Fraud

Coverage of driver insurance, which has about 5 million subscribers, will be reduced starting this July.

According to the insurance industry on the 30th, non-life insurance companies such as Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, KB Insurance, and Meritz Fire & Marine Insurance plan to increase the self-pay portion of traffic accident settlement support funds and attorney fees in driver insurance by up to 20% as early as this July.

Driver insurance, which covers legal costs arising from injuries to the insured and accidents occurring while driving, is not a mandatory insurance like automobile insurance. Nevertheless, the number of people subscribing to prepare for accidents is gradually increasing. According to the disclosure by the General Insurance Association, the number of new driver insurance contracts last year was 4.93 million, making it the most sold single type of insurance. Non-life insurers have also increased sales, expecting the driver insurance market to grow further considering the number of vehicles owned.

However, as driver insurance has increased, criticism has grown that it causes moral hazard such as insurance fraud. In the past, driver insurance only covered criminal settlement money and attorney fees as fixed amounts, but with multiple subscriptions, it was possible to receive more than the actual criminal settlement amount incurred. In the early to mid-2000s, the maximum coverage amount for the special contract covering criminal settlement money was 30 million KRW (in case of death), but after 15 years, it has surged to a maximum of 200 million KRW.

Accordingly, financial authorities such as the Financial Services Commission and the Financial Supervisory Service demanded measures to prevent excessive competition in driver insurance and moral hazard among some subscribers, and non-life insurers proposed the self-pay portion.

The surge in interest in driver insurance is also due to stricter driver penalties. Laws such as the so-called 'Yoon Chang-ho Act' and 'Min-sik Act' have been enacted due to drunk driving and school zone accidents, increasing social interest in safe driving and pedestrian protection. Reflecting this, competition among driver insurance products covering legal costs has intensified.