By Kim Hyun-cheol
Staff Reporter
A buyer of a Harley-Davison motorcycle in South Korea priced at 15 million won ($14,261) has to pay more four million won a year for insurance, or more than 27 percent of the price.
Insurance companies said Wednesday that a male driver with a perfect driving record over one year must take out a policy worth 4.4 million won a year, accumulation of which exceeds the price of the bike in four years. The same fee is applied to cars valued at more than 100 million won for the same coverage.
Insurers say the policy has enough benefits since motorcycles have a much higher accident and damage risk.
Bikers are not welcome customers at insurance firms, as most of their accidents are fatal. They are also more prone to moral hazard, as riders can cause an accident on purpose to buy a new bike with the insurance money.
Between April last year and March this year, the overall ratio of paid insurance to premium profits was 71.8 percent for cars and 101.8 percent for motorcycles. This means motorcycle coverage does companies no good, often leading to rejection of coverage.
Another reason is that motorcycles are likely to be damaged worse than cars in an accident. For Harley-Davison models, up to 90 percent of the insurance fee is earmarked for damage.
The lower insured rate of bikers also contributes to their discrimination. By law, motorcycle owners must buy liability insurance but fewer than 30 percent do so, according to the Korea Insurance Development Institute.
Analysts warn that excessively high fees will likely result in a vicious circle of low insurance subscription for motorcycle riders.
"More motorcycle owners buying insurance will surely lower fees, but this is not easy to do because it will require a change to the system by introducing obligatory registration for them," the Financial Supervisory Service said.