Park Han-sol reports on Korea's financial regulators, along with fintech and insurance. She previously wrote about the art world, from biennales and exhibitions to fairs and auctions, with a focus on Seoul and the figures shaping the scene. Before joining The Korea Times, she spent a year at ABC News' Seoul bureau, contributing to coverage of major Asia-Pacific events.
Insurers warn of weak oversight, rising costs in gov't premium discount plan tied to driving restrictions
The parking lot of an apartment complex in Seoul's Songpa District is filled with cars, April 8, the day the government's odd-even vehicle rotation system took effect for public sector employees to ease energy supply strains triggered by the U.S.-Iran conflict. Yonhap
By Park Han-sol
Korean insurers are voicing concerns over the effectiveness of a government proposal to offer premium discounts to drivers who comply with a vehicle rotation scheme that aims to ease the current energy supply strain, according to industry officials Monday.
The officials said the plan is prone to false reporting and may overlap with existing policy discounts, effectively shifting the cost of a public measure onto private insurance companies, and ultimately, onto consumers.
Amid the U.S.-Iran conflict, which has heightened concerns over oil supply, public sector vehicles have been subject to an odd-even rotation system since April 8, restricting use every other business day based on license plate numbers.
For private vehicles, a five-day rotation that bars cars from operating on one designated weekday, remains voluntary.
The government is in talks with insurers to introduce temporary policy discounts to drivers who observe the scheme. Details, including the duration and discount rate, are expected to be announced later this week.
A key concern, insiders say, is the lack of a reliable way to verify compliance. With no credible mechanism to track actual vehicle use, the proposal makes it difficult to prevent false claims.
“Without a state-led verification system, there is no practical way for insurers to check compliance on an individual basis,” an industry official said. “So in reality, that raises the likelihood of this turning into a de facto blanket discount for all drivers.”
Because auto insurance is mandatory and covers a broad base of drivers, even a 1 to 2 percent cut in premiums can translate into substantial losses for insurers.
“From an individual driver’s perspective, the discount might only amount to several thousand to tens of thousands of won a year, so the benefit may feel marginal,” the official added. “But for insurers, applying even a small reduction across such a large pool of policyholders creates a considerable burden.”
Another sticking point is how the proposal interacts with existing mileage-based discounts. Major non-life insurers such as Samsung Fire & Marine Insurance and Hanwha General Insurance already offer programs that refund premiums to drivers for keeping annual mileage below certain thresholds.
Because the rotation scheme would naturally reduce driving distances, participants could end up qualifying for both programs, effectively creating a “double discount” situation.
“Given that auto insurance is essentially universal, excluding drivers who already receive mileage-based discounts would undermine the policy’s impact and could trigger public backlash. So, in practice, that makes overlapping benefits more likely,” the official noted.
The added burden comes at a time when insurers are already under pressure in the auto insurance segment. Profitability has been declining since 2022, with the sector posting a combined loss of 708 billion won ($480 million) last year.
Additional costs, insurers warn, can be passed on to policyholders as a whole.
“Auto insurance premiums are typically adjusted once a year based on accumulated loss ratios,” another official said. “If losses build up, that eventually feeds into higher premiums, meaning the burden is likely to be passed on to consumers.”