Auto insurance to be bigger burden

By Kang Seung-woo

Long-term accident-free drivers will benefit from insurance premium discounts, while monitoring fake patients will be intensified to help the struggling auto insurance industry, the nation’s financial regulator said Wednesday.

In addition, the government will strengthen rules to force those who commit traffic violations to pay higher premiums and drivers will have to pay up to 500,000 won for repairs after car crashes.

According to reform measures for auto insurance by the Financial Services Commission (FSC), along with the Ministry of Health and Welfare, Fair Trade Commission, Ministry of Land, Transport and Maritime and Financial Supervisory Service (FSS), drivers who have an 18-year accident-free history will receive 70 percent off their auto insurance premiums.

This action came while most auto insurers are struggling with the loss ratio soaring over 80 percent for four consecutive months since August.

The ratio, which is the portion of insurance money to their insurance premium income, is seen as the barometer for companies’ profitability and if a loss ratio stays above 80 percent, auto insurance firms are not able to make their ends meet.

Currently, auto insurance companies reward accident-free drivers with 5 to 10 percent discounts in no-claims bonuses every year and can be as high a 60 percent of the premium for those who have a perfect driving record for 12 years.

The government agencies have also come up with a set of new measures to prevent fake claims by people claiming to be injured in car accidents.

Instead of their insurance firm, the Health Insurance Review and Assessment Service will take on the role to evaluate the treatment fees of patients to uncover false or excessive treatments as well as to settle disputes between claimants and insurers.

In addition, those who have minor injuries will have to receive outpatient treatment, but they can be admitted if the hospital believes it is necessary.

The FSC said that on-site examinations of hospitals by private and government sectors will be conducted once a year to single out frequently absent patients.

The FSC said that it has extended a one-year period which factors in the number of traffic violations including speeding and disregarding traffic lights in the premium to two years.

According to the current rule, just one-time violations are not reflected in the next year’s premium hike, but by stretching the time span, frequent offenders will see their premium grow sharply.

“The increase of premiums from traffic violators will be spent to reduce those who observer the rules,” an official of the FSC said.

Drivers will have to pay up to 500,000 won when repairs are made to their vehicles, according to the reform measures.

Currently, customers have only to pay a fixed rate to which they agreed with insurers when they signed up for the insurance policy.