Car insurance, reasonable compensation and premium improvement … reduces the burden on the public. |
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- Institutionalization of future treatment costs that were previously paid without criteria and improvement of long-term treatment for chronic patients - Expansion of recognition for accident-free records of spouses and children, and improvements in surcharges for serious regulatory violations, etc. |
□ The Ministry of Land, Infrastructure and Transport (Minister Park Sang-woo), the Financial Services Commission (Chairman Kim Byung-hwan), and the Financial Supervisory Service (Governor Lee Bok-hyun) have established measures to improve the "Automobile Insurance Fraud Prevention Plan" to alleviate the burden of automobile insurance premiums on the public and support appropriate compensation for accident victims, and have decided to promptly implement follow-up actions.
□ Automobile insurance aims to protect accident victims by maximizing coverage for their treatment; however, there have been ongoing issues of abuse, insurance fraud, and excessive settlement payments.
* On March 6, 2024, the Financial Supervisory Service announced that it detected 547.6 billion won (65,000 people) in automobile insurance fraud in 2023.
ㅇ In particular, the treatment costs for minor injury patients diagnosed with conditions such as joint and muscle strain due to excessive treatment and long-term care have seen an average annual increase rate of 9% over the past six years, which is more than 2.5 times higher than the 3.5% increase for serious injury patients, reaching approximately 1.3 trillion won in 2023 alone.
- Insurance companies have been habitually paying future treatment costs* without a legal basis for the purpose of early settlements, which as of 2023 has amounted to 1.4 trillion won, exceeding the treatment costs, and this has contributed to rising premiums for over 24 million policyholders.**
* Treatment costs paid in advance for additional treatment expected to occur after the conclusion of treatment.
** The Board of Audit and Inspection pointed out excessive and unsubstantiated settlement payments (future treatment costs) during its audit in May 2024.
< Car Insurance Excess Long-Term Treatment and Medical Expense Receipt Cases > |
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① The driver affected by a rear-end collision (car-to-car) without vehicle repair incurred 5.8 million KRW for 58 outpatient treatments. ② In a non-contact accident caused by merging, the affected driver received 202 outpatient treatments due to muscle tension and sprains from sudden braking, resulting in 13.4 million KRW in medical expenses. ③ The driver involved in a side mirror collision (car-to-car) (20% fault) was diagnosed with a spinal sprain (Grade 12 injury) and received 5 million KRW in medical expenses and 3 million KRW in settlement after 2 weeks of hospitalization and 6 months of outpatient treatment. |
On the other hand, there have been demands for institutional improvements regarding the issue that spouses or children who have safely driven under the family car insurance do not receive recognition for their driving experience when signing up for their own car insurance.
- There were also calls for improvements in the system regarding the lack of a premium surcharge system for serious traffic law violators, such as those driving under the influence of drugs, and the electronicization of the payment guarantee process.
□ In response, relevant agencies such as the Ministry of Land, Infrastructure and Transport, the Financial Services Commission, and the Financial Supervisory Service have decided to ensure appropriate treatment based on the degree of damage to alleviate the burden of insurance premiums on the public, while ensuring sufficient compensation for actual damages, and to strengthen sanctions and penalties for unhealthy behaviors and to address deficiencies in the operation of the insurance system.
- To this end, on December 16, 2024, the 5th Insurance Reform Meeting (chaired by the Vice Chairman of the Financial Services Commission) was held in private to gather opinions from consumers, academia related to insurance, research institutions, and the industry, and ultimately the following institutional improvement measures were prepared.
➊ Establish an appropriate compensation system that matches the degree of damage from car accidents.
- For future treatment costs that have been paid as a practice without the basis of car insurance terms, payment will be made only for seriously injured patients (injury grades 1-11) who have a high need for future treatment, and the basis for payment and criteria will be clarified to induce compensation for treatment costs that match the degree of damage.
- In addition, to alleviate the economic burden on patients beyond treatment costs, research will be conducted to revise the compensation payment standards for lost income and discussions will be pursued regarding the legalization of compensation items stipulated in the car insurance terms.
- For minor injury patients (injury grades 12-14) diagnosed with joint or muscle strain (sprain), if they wish for long-term treatment exceeding the usual treatment period (8 weeks), a procedure will be established to submit additional documents such as medical records to the insurance company to confirm the necessity of treatment.
* Workers' compensation insurance defines the treatment period for sprains within a range of 6 weeks, and the Korean Medical Association stipulates the treatment period for strains and sprains to be within 4 weeks according to the "Guidelines for Writing and Issuing Medical Certificates."
** Currently, 90% of minor injury patients under car insurance complete treatment within 8 weeks from the date of injury.
- If the insurance company reviews the additional documents and determines that the justification for treatment exceeding the usual treatment period is low, it will notify the patient in writing of the plan to suspend payment guarantees for that patient.
- If the patient does not agree with the insurance company's plan or if a dispute arises, a neutral and objective mediation body and procedure will be established to resolve the issue.*
* To ensure objective and transparent reviews, mediation criteria will be established and disclosed, including medical and engineering aspects.
➋ Prevent and strengthen penalties for unhealthy practices related to car insurance.
- When receiving future treatment costs, the insurance company will inform that overlapping treatment for the same symptoms cannot be received under health insurance or other insurance.
- Support for detecting overlapping benefits from other insurance-related agencies will also be pursued.
- For repairers who have been convicted of insurance fraud with a sentence of imprisonment of one year or more, administrative penalties will be strengthened from current business suspension to cancellation of business registration, which is at a level similar to other legislative examples.
- Furthermore, to prevent serious traffic law violations and raise public awareness, a premium surcharge standard (20%) will be established for drug and substance driving, similar to other serious traffic law violations such as drunk driving, and compensation will be reduced by 40% for passengers in vehicles involved in drug driving, unlicensed driving, and hit-and-run incidents, just like for passengers in drunk driving vehicles.
➌ Improve the detailed operational methods of car insurance, such as premium calculation rates and payment guarantee procedures, to align with reality.
- To alleviate the insurance premium burden for young adults (ages 19-34) who are newly signing up for car insurance after becoming independent due to employment or marriage, the no-accident record of children who have driven under their parents' insurance will be newly recognized, and spouses will also have their no-accident records recognized for up to 3 years, regardless of the type of driver-limited special contract.*
* Currently, no-accident records are recognized only if the spouse has driven under the "couple limited special contract."
- As quality-certified parts under the "Automobile Management Act" are recognized as equivalent to OEM parts, the insurance terms will be amended to include quality-certified parts in the range of new parts that can be used for vehicle repairs, thereby improving the high-cost repair structure centered on OEM parts.
* Quality-certified parts are those that have been certified by an institution designated by the Ministry of Land, Infrastructure and Transport as having the same or similar performance and quality as OEM parts manufactured by automobile manufacturers.
- To enhance the convenience of patients receiving treatment due to car accidents and to streamline the administrative process of medical institutions, a system will be introduced to electronically process the current payment guarantee procedure, which involves "medical institutions contacting insurance companies by phone → insurance companies sending payment guarantee documents by FAX."
- Additionally, the results of accounting for mandatory automobile insurance will be submitted to the Ministry of Land, Infrastructure and Transport annually, and a reporting obligation will be established if necessary to protect subscribers and insured parties, thereby establishing a systematic management foundation for mandatory automobile insurance.
□ The main contents of this improvement measure, including the establishment of payment grounds for future treatment costs and the submission of additional documents for long-term treatment of minor injury patients, are planned to be completed within this year through amendments to relevant laws and terms, while the expansion of no-accident record recognition and electronic payment guarantees will be implemented within the first half of this year.
- Through this, it is expected that unnecessary compensation payments will decrease, resulting in a reduction of approximately 3% in individual car insurance premiums (estimated by the Insurance Development Institute).
□ Vice Minister Baek Won-guk of the Ministry of Land, Infrastructure and Transport stated, "Through this improvement plan, we expect to reasonably improve the order of automobile insurance operations, thereby reducing the burden on automobile insurance subscribers while supporting reasonable compensation for accident victims."
- "We will strive to enhance the social security function of automobile insurance by communicating with relevant agencies, the insurance industry, and consumer organizations while establishing a transparent and sound automobile insurance system that protects accident victims at an appropriate level," he added.
□ Vice Chairman Kim So-young of the Financial Services Commission expressed, "We expect that the unnecessary leakage of automobile insurance payments will be improved through this improvement plan," and added,
- "We will strengthen supervision over the unreasonable denial of insurance payments or the rationality of premium adjustments by insurance companies in collaboration with the Financial Supervisory Service to ensure that institutional improvements directly benefit policyholders."