Inconsistent Premiums Raise Public Anger

A policyholder, Lee (53), recently asked the car insurer to change his policy from “coverage only for family members in case of an accident” to “coverage only for couples,” guaranteeing a much cheaper premium – only to be refused.

The car insurers have increased the insurance rates by an average of 3.5 percent since November 1, and at the same time offered a variety of special polices such as coverage only for family members or couples, which commits much cheaper premiums in an effort to induce customers.

When new insurance products with high premiums were introduced to the market, many insurers forced policyholders to change their policy to new ones in the past, Lee said. Now many car insurers have been busy offering special products with relatively cheap premiums after they raised the general insurance rates last month. This makes insurers face fierce price competition for special products, while policyholders file complaints over rates randomly decided by companies.

Public anger for being refused to transfer to products with cheaper premiums:

Last November, new products called “coverage only for couples or driver in case of an accident” were introduced in the market. Since then, such policies offer reduced insurance rates by 20 percent and 28 percent respectively compared to basic ones, inducing many policyholders to have their current policy transferred to the newly introduced ones.

However, many insurance companies have insisted that they could not deliver all the customers’ requests. Kang Byung-sam, marketing manager of an online car insurance company, INSUNET, said, “The newly introduced products cannot be offered to existing customers – such products are only for new policyholders.”

However, Chung Chun-tak, manager for the special insurance team in the Financial Supervisory Board (FSB) said, “There are no responsibilities, of course, for insurers to deliver all the customers’ requests for changing policies since insurance contracts are made voluntarily. However, it is reasonable to expect insurers to follow policyholders’ requests for transferring their policies based on common sense and business morality.”

Inconsistent principles are being applied to come up with rates for each customer: Insurers can determine insurance rates, give or take five percent, based on their own judgments. The problem is some insurers do not have fare and clear rules applied to presenting rates, making some customers paying higher premiums while other customers with the same risk paying lower.

An insider of Samsung car insurance company, who asked to remain unidentified said, “We apply lower rates for policyholders who are believed to have lower risks with consideration of track record, while applying higher rates for policyholders with many accident records.”

The manager, Chung, of FSB contradicted the insiders’ idea, saying the reality is just the opposite of the insider’s maintenance. He went on to say that many insurers have applied relatively lower rates for so-called “high-risk” customers who have many accident records since such customers have made significant contributions to company’s profits by paying higher premiums. On the contrary, policyholders with no or little accident history have been forced to pay higher rates than they were supposed to.

Even some insurers have applied inconsistent rates to customers with same risk rates or refused some customers with lower risk rates to subscribe, since such policyholders can be discounted by 60 percent in their premiums.

Now the FSB is investigating into insurers’ suspected of wrongdoings. If any misdeeds by insurers are to be found, the insurers will be required to return to its fare rates, the FSB said. Thus, confusion and turmoil might be heightened for policyholders in case any problem is to be detected.

witness@donga.com