[Exclusive] Auto Insurance Improvement Plan to Be Released... Prohibition on Future Treatment Costs for Minor Injury Patients

Ministry of Land and Financial Authorities Begin Automobile Insurance Reform Since Last Year
Automobile Insurance, Along with Indemnity Insurance, Causes Excessive Medical Treatment and Medical Shopping
Stricter Regulations for Additional Treatment of Minor Injury Patients
Discussion Underway to Reclassify Concussion as Grade 12

The government is set to improve automobile insurance, which has caused issues such as excessive medical treatment and medical shopping, alongside indemnity insurance. For personal injury compensation, a plan has been finalized to prohibit the payment of future medical expenses (settlement money) to minor injury patients classified as injury grades 12 to 14.

According to a comprehensive report by Asia Economy on the 13th, the Ministry of Land, Infrastructure and Transport and financial authorities plan to announce automobile insurance improvement measures as early as the end of this month or early March. Automobile insurance is facing a serious situation with insurance fund leakage due to excessive medical treatment, frequent premium reductions, and worsening loss ratios caused by increased repair costs. As a result, except for some major companies, non-life insurers are experiencing deepening deficits.

The government views excessive medical treatment of minor injury patients as a major cause of automobile insurance leakage. The domestic automobile insurance system classifies injuries into 14 grades, and the limits of personal injury compensation are determined differentially according to these grades. Minor injury patients fall under grades 12 to 14, which include simple contusions without fractures or less severe injuries such as spinal sprains. The treatment period for minor injury patients is usually 3 to 4 weeks. However, excessive medical treatment behaviors are widespread, such as minor injury patients receiving unnecessary treatments at Korean medicine clinics. From the first to third quarters of last year, the treatment costs for minor injury patients in automobile accidents at four companies?Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, and KB Insurance?amounted to approximately 955.9 billion KRW, a 7.7% increase compared to the same period the previous year.

The Ministry of Land, Infrastructure and Transport and financial authorities recently held a closed-door meeting and agreed not to allow future medical expenses for minor injury patients. Future medical expenses are a type of settlement money paid in advance by the insurer, calculated based on anticipated future treatment costs at the time of settlement with the victim. Insurers have a practice of increasing settlement money under the name of future medical expenses to encourage early settlements. This is to avoid the risk of minor injury patients receiving treatment indefinitely and continuously claiming insurance money. The problem is that there are no clear standards regarding future medical expenses, leading some victims to exploit this and engage in excessive medical treatment. This creates a vicious cycle of insurance fund leakage, rising loss ratios, and premium increases. Another issue is the 'double compensation' where minor injury patients receive future medical expenses and then undergo treatments covered by health insurance. A senior official from the insurance industry said, "The prohibition of future medical expenses for minor injury patients aims to encourage reasonable treatment rather than compensation," adding, "We are preparing measures that maximize the victim's right to choose treatment."

If future medical expenses for minor injury patients are prohibited, minor injury patients involved in automobile accidents will only be able to receive treatment at hospitals or clinics and claim insurance money accordingly. With the revision of automobile insurance terms and conditions, treatment for minor injury patients has been basically guaranteed for up to 4 weeks from the date of the accident since January 2023. If treatment is needed beyond 4 weeks, a medical certificate must be submitted to the insurer every 2 weeks. The problem is that some hospitals issue medical certificates too easily, which does not resolve the issue of excessive medical treatment for minor injury patients. The government is currently preparing measures to address this side effect as well. Medical and objective evidence that patients need to continue treatment is expected to become more stringent.

During discussions on automobile insurance improvements, the government also focused on the possibility of raising the injury grade for concussion from grade 11 to grade 12. Concussion is considered a major cause of so-called 'malingering patients' who seek large insurance payouts and settlements through long-term hospital treatments. This is because concussions are often diagnosed based on the patient's subjective opinion rather than the doctor's assessment.

As insurance fund leakage due to false concussion diagnoses worsened, the Ministry of Land, Infrastructure and Transport established detailed diagnostic criteria for concussion in January last year after review by medical organizations. According to these criteria, concussion must have a clear causal relationship with the automobile accident. It is recognized as a concussion only if symptoms such as loss of consciousness within 30 minutes, post-traumatic amnesia within 24 hours, or signs of disorientation are recorded in the initial medical institution's first examination medical records. If these criteria are not met, it is recognized only if a neurologist judges it as a concussion. However, false concussion diagnoses and insurance claims have continued even after this.

In the upcoming improvement plan, there is a possibility of adding mild concussions without changes in consciousness or memory to injury grade 12. Adding a 'concussion without changes in consciousness or memory' item to the detailed guidelines for acute stress disorder after trauma, which is currently in grade 12, has also been proposed as an alternative. Some insurers handling automobile insurance have reportedly suggested expanding the scope of minor injury patients to include grade 11. However, such measures would require amendments to the Enforcement Decree of the Automobile Damage Compensation Guarantee Act, so they may remain long-term tasks. An insurance industry official said, "The automobile insurance improvement plan, which has been discussed since last year, is almost in the final coordination stage," adding, "The announcement was slightly delayed due to personnel changes at the Ministry of Land, Infrastructure and Transport at the beginning of the year."