The range of new parts available for use during vehicle repairs by auto insurance subscribers includes quality-certified parts. This is intended to address the issue of rising auto insurance loss ratios due to repair practices focusing on expensive original parts. The repair costs covered by insurance will also be based on the prices of quality-certified parts.
According to the financial sector on the 28th, financial authorities will revise the standard terms of auto insurance with this content. Quality-certified parts are components manufactured by automotive manufacturers under original equipment manufacturer (OEM) terms, commonly referred to as original parts, that have the same or similar performance and quality but are about 35% cheaper. These are parts that have been reviewed and certified by an institute designated by the Ministry of Land, Infrastructure and Transport. Currently, under the Automobile Management Act, quality-certified parts are recognized on par with OEM parts.
Previously, quality-certified parts were not included in the range of new parts allowed for repair under the standard auto insurance terms. Some property insurance companies have been refunding 25% of the OEM product repair costs when repairs are made using quality-certified parts through specific contracts. However, subscribers have preferred OEM repairs, preventing the activation of quality-certified part repairs.
Recently, the sharp rise in part prices has been identified as one of the causes of the auto insurance loss ratio increasing due to the practice of repairing predominantly with OEM products. The performance of insurance companies in repairing with quality-certified parts has remained at about 100 cases per year. Therefore, financial authorities have decided to revise the standard terms to include quality-certified parts in the range of new parts.
It has also been decided to specify in the standard terms that when estimating the cost of repairs for part replacements, "the cost for exchanging and repairing should be limited to the minimum expense incurred when considering the procurement period and procurement price of new parts that can be procured." This means that repair costs can be based on quality-certified parts that are inexpensive and convenient to procure when determining insurance payments. Applying the standard terms will...
The Insurance Development Institute is also reportedly preparing to conduct accident reenactment experiments in June to promote the activation of quality-certified parts.
Improvements will also be made regarding insurance payments for drug and substance abuse driving and passengers. If an accident occurs due to drug or substance abuse driving, the insurance premium will be increased by 20%, similar to other major traffic law violations like drunk driving. For passengers in vehicles driven by someone under the influence of drugs or substances, without a license, or in hit-and-run cases, compensation will be reduced by 40% just like for passengers in drunk driving vehicles.