Under the revised system, the premium rating will increase by two grades with a crash regardless of its gravity and three grades with more than two crashes. (image: Kobizmedia/ Korea Bizwire)
SEOUL, Aug. 23 (Korea Bizwire) – It is expected that from the year of 2018 the more drivers may have accidents, the more they will pay insurance premiums, regardless of the damage size.
According to the revision of the auto insurance premium ratings system by the Financial Supervisory Service (FSS), the current system determined by the “points” of raising or reducing the insurance premium in accordance of damage size will be changed to the new one in which the number of crashes, not the damage size, is the determining factor.
Under the revised system, the premium rating will increase by two grades with a crash regardless of its gravity and three grades with more than two crashes. Also, its premium rating increase is limited to nine grades for a year. There are a total of 26 premium rating grades in the system.
On the contrary, the term to earn an accident-free discount will be shortened to one year from currently three years. Drivers who have an at-fault accident for a year will get one grade decreased premium rating.
FSS expects that the accumulated cost of the increased premium to be paid by all the drivers with multiple accidents will reach to 230 billion won(US$225 million), which will be used to lower the cost of car insurance for drivers without any accident.
An official at FSS said, “Under the revised system, accident-free drivers who are almost 80 percent of all the insurance subscribers will receive the benefits of discounted premiums. It is made to impose more premiums on irresponsible drivers with frequent accidents.”
However, the Korea Finance Consumer Federation (KFCF) opposed the revision by arguing it was only made to reduce the number of accidents, not to cover the damages by the accidents, although undoubtedly covering the damages is the main reason to buy the insurance.
KFCF said, “The new system excessively increases the insurance premiums of those who cause minor accidents which take more than 60 percent of the total accidents. The drivers will pay for the repairs from the slight accidents out of their own pockets to avoid the additional premiums or have to pay more insurance premiums, all of which will benefit only insurance companies.”
“It is reasonable to consider the damage size and the number of accidents together in assessing the accident risks of drivers. What is needed to be made is a complementary countermeasure to the current point system, not the transition to the case-based system,” added the consumer federation.
By John Choi (johnchoi@koreabizwire.com)
