Introduction of Discount and Surcharge System for Substitute Driver Insurance Starting September

Starting this September, insurance premiums for designated driver insurance will be discounted or surcharged based on the number of accident claims.

The Financial Supervisory Service announced on the 12th that the accident-based discount and surcharge system for designated driver insurance will apply to contracts commencing coverage from the 6th of next month.

Until now, designated driver insurance did not have a premium charging system that considered accident history, causing frequent rejections of insurance applications from designated drivers with multiple accidents. In response, the Financial Supervisory Service and the insurance industry announced an "Improvement Plan for Designated Driver Insurance Products" last December, which includes differentiated premium charges based on accident history.

The discount and surcharge system applied to designated driver insurance will differentiate premiums according to the number of accidents (0 to 3 or more) over the past 3 years and the most recent 1 year for each designated driver.

Accident-free drivers will receive premium discounts based on their accident-free period (up to 3 years), while designated drivers with multiple accidents will be surcharged according to the number of accidents.

The maximum discount and surcharge range is from -11.1% to 45.9%, which means the discount range is larger and the surcharge range is lower compared to personal insurance (-10.9% to 65.5%).

One accident with a fault ratio below 50% is excluded from the accident count for the most recent 1 year and only reflected in the 3-year accident count to minimize the surcharge. Accidents without fault, such as vehicle damage caused by typhoons or floods, are excluded from the accident count.

Insurance companies have also agreed to relax underwriting standards for designated driver insurance to expand insurance enrollment opportunities for designated drivers with accident histories.

For example, if the previous standard rejected applications after 3 accidents within 3 years, the new standard will reject applications only after 5 or more accidents within 3 years.

A Financial Supervisory Service official stated, "With this improvement, designated drivers with accident histories will be able to pay reasonable premiums and maintain their livelihoods by obtaining insurance. Additionally, discounts for accident-free records will encourage safer driving."