Tougher to Reject Auto Insurance Applicants

It will be tougher for non-life insurance companies in Korea to reject applications for automobile insurance.

According to non-life insurance businesses on Jan. 4, Korea’s Financial Supervisory Service send notification letters to insurance companies on Jan. 2 informing them of the new regulation that requires them to accept all auto insurance applications, excluding exceptional cases, such as those with more than three accidents over the past three years, or those with a record of insurance fraud.

Until now, some insurance companies have rejected applications which have not had an accident for a length of time. The companies argue that despite extending the “no-accident” period from seven years in 2006 to nine years for 2008, these accounts bring in small profits due to large discount rates under which the fees are discounted up to 60%.

Currently, these auto insurance applicants have had to subscribe additional instruments or insurances that require extra fees as part of the conditions for approval.

There have also been complaints that insurance companies rejected insurance applications for drivers living in areas where accidents are frequent, drivers of expensive imported vehicles, and teenage drivers.

The Financial Supervisory Service plan to enforce the regulation by placing sanctions on executives of the companies or warning companies in violation. Insurance companies are also required to provide an explanation as to why an applicant with a history of accidents is rejected.

Meanwhile the Korean Non-Life Insurance Association will establish a consulting center beginning Jan. 4 to help answer questions related to automobile insurance and to receive complaints by rejected applicants.

peacechaos@donga.com