Dispute over Raising the Automobile Premium Surcharge

Office worker Mun (40, Seocho-gu, Seoul) recently violated the traffic laws twice in one day. One was for overspeeding. The other was for disobeying the traffic signal.

Starting next September, his automobile insurance premium will increase by 20 percent proportionally.

Kim (37, Dobong-gu, Seoul) found his car badly crushed overnight in his apartment building’s parking lot on his way to work. His auto insurance covered the cost of replacing the back door and the bumper, which cost 700,000 won.

Starting next January, he will have to pay premiums that will be 10 percent more.

Insurance subscribers are protesting against the fact that insurance premiums on traffic law violation and car accidents in which the perpetrators are unknown will jump significantly.

What Changes Will Occur-

According to the Financial Supervisory Service (FSS) and the insurance industry, insurance premiums on “grave traffic law violations” under the exemption law for traffic accidents will surge proportionally starting next September.

Until now, premiums have been surcharged at 5-10 percent regardless of frequency, but from now on, every violation will bring about an increase in the premiums by 10 percent up to a maximum of 30 percent.

Currently, if an insurer covers the cost of handling a car accident, in which the perpetrator is unknown, the premium reduction is postponed for three years. However, from next year, according to the premiums, a discount will be delayed for a year if the premium is below 300,000 won. For a premium exceeding 300,000 won and lower than 500,000 won, a discount will be delayed for three years. For those over 500,000 won or two more accidents, a 10 percent will be surcharged.

Considering that most drivers have the cost caused only by major accidents covered by insurers, the burden of paying premiums is meant to rise.

Jeong Jun-taek, director of the insurance supervisory department at the Financial Supervisory Service, explained, “The intent of changing the premiums is to prevent traffic accidents and insurance subscribers’ moral hazard. The increasing premiums will be used to cut down premiums of the accident-free drivers.”

Is Every Driver the Subject of Surcharges?-

According to the National Police Agency, 11.38 million cases involved overspeeding (exceeding speed limit by 20km/h) last year.

This translates to all automobile insurance subscribers, 13 million people, violating the speed limit once a year on average, and that starting next September, every subscriber will face a 10 percent increase in insurance premiums.

Mun complained, “It is unfair to charge premiums even after being fined and noted with black marks only because there is possibility to cause another accident. It’s a multiple disadvantage.”

Park Yong-hun, the representative of the Coalition for Transportation Culture, pointed out, “Speed limits are set too low for road planning speed and the vehicles’ capacity, and it varies on every road. Therefore, drivers often violate speed limits unknowingly.”

Insurance Companies “Hushing Up”-

While premium surcharge on “unknown perpetrator” car accidents and drivers charged with traffic law violation will go into effect starting next January and September, respectively, car accidents which are the subject of surcharges are already being evaluated from January, and traffic violation from May.

Nonetheless, insurance companies are not informing their subscribers of this fact.

There are many people who say that they cannot trust their insurers’ words that the increasing premiums will be returned to accident-free subscribers. Some people wrote on the homepage of the Korean Non-Life Insurance Association, “Who would believe what they are saying?” or “I suspect the government and insurers are deceiving people to benefit each other.”

Lee Min-se, professor of business administration at Soongeui Women’s College, said, “When the premium surcharge system in the case of traffic law violation was first introduced in 2000, they said they would reduce the insurance premiums of trouble-free drivers, but they didn’t even reveal the details to the public. They have to disclose the details about how automobile premiums have been used to the public.”

Kyung-Joon Chung news91@donga.com