7 Out of 10 Auto Repair Shops Report "Experience of Repair Cost Reductions by Insurers"

Reduction Rates High at Samsung (71.2%) and DB (70.8%)
Industry Voices Concern Over "Unilateral Reductions and Severe Payment Delays"
"Standard Agreement Needed"... Calls for Government Standards

It has been found that 7 out of 10 auto repair shops have experienced reductions in repair costs imposed by their partner insurance companies.

According to the results of the "Survey on the Transaction Status between the Auto Repair Industry and Insurance Companies" released by the Korea Federation of SMEs on August 25, more than 70% of auto repair shops responded that they had experienced reductions in repair costs from their partner insurance companies. The main reasons for these reductions were: ▲ non-recognition of costs for panel beating and painting work ▲ partial non-recognition of repair items ▲ excessive reduction of work hours ▲ non-recognition of work on new vehicle models due to lack of prior agreement, in that order.

Over the past three years, Samsung had the highest proportion of cases involving reductions at 71.2%, followed by DB at 70.8%, and Hyundai and KB at 69.8%. The average reduction rates were 10.1% for Samsung, 10.0% for DB, 9.9% for Hyundai, and 9.6% for KB. The Federation explained, "This means that out of every 100 repair cost claims, more than 70 were reduced by 10%. We believe it is urgent to establish standards for determining and rigorously implementing repair rates."

When deciding labor rates (hourly labor costs) with insurance companies, the most common response was that they are based on "the repair rates set through consultation by the Auto Insurance Repair Council." However, 26.8% to 27.2% of respondents said that they follow "insurance companies' own standards," indicating that this customary practice is deeply rooted. Regarding payment settlement periods after repairs are completed, "within 10 days" was the most common response at 61.2% to 65.8%, but it was also confirmed that there are unfair practices, such as no delayed interest being paid on overdue payments that exceed the contractual payment deadline.

In terms of unfair practices experienced in transactions with insurance companies over the past three years, the most common was "delayed payment of repair costs exceeding 30 days and non-payment of delayed interest" (66.1%), followed by ▲ non-recognition of standard work hours and procedures (64.5%) ▲ unilateral reduction of repair costs (62.9%) ▲ forcing repair shops to collect policyholders' deductibles on behalf of insurance companies (50.2%) ▲ requiring the use of specific repair cost claim programs (41.4%).

When asked about the number and amount of unpaid repair payments by insurance companies over the past three years (2022-2024), the number of unpaid cases by insurer was: ▲ DB 1,049 cases ▲ Samsung 729 cases ▲ Hyundai 696 cases ▲ KB 228 cases. During the same period, the amounts of unpaid claims were 754.47 million won for Hyundai, 609.4 million won for Samsung, 370.88 million won for DB, and 195.27 million won for KB.

When asked about the need for a standard agreement between insurance companies and repair shops, 95.4% responded that it was necessary. The most requested items to be included in the standard agreement were disclosure of details of repair cost reductions upon request (89.6%), timing of repair cost claims and payments (87.3%), regulations on the payment of delayed interest in case of late payment (86.3%), and guarantees of repair cost payments (84.7%).

Choo Moon Gap, Head of Economic Policy at the Korea Federation of SMEs, stated, "The results of this survey reveal the beginnings of unfair practices such as unilateral repair cost reductions, delayed payments, and non-payment of delayed interest in transactions between the auto repair industry and insurance companies." He added, "Institutional improvements, such as the introduction of a standard agreement, are necessary to ensure that repair shops receive fair compensation and that transparent business practices are established based on mutual cooperation. In addition, there is a need for government-level standardization and the establishment of criteria for calculating repair costs."