The Financial Supervisory Service announced a notice of proposed policy terms revisions applying the "8-week rule" to lower the automobile insurance loss ratio. The 8-week rule is a policy the Ministry of Land, Infrastructure and Transport (MOLIT) is pursuing to curb premium hikes by reducing automobile insurance loss ratios. The crux is that when a traffic-accident minor-injury patient receives treatment for 8 weeks or longer, the insurer reviews the case and decides whether to pay the claim. The Financial Supervisory Service moved ahead with preemptive terms revisions on the view that the Ministry of Land, Infrastructure and Transport will soon finalize the amendments.
On the 31st, according to the financial authorities, the Financial Supervisory Service posted a notice of proposed amendments to the Detailed Regulations on the Supervision of Insurance Business that include matters related to the 8-week rule. The notice also included payment standards for future medical expenses that insurers have customarily paid in advance to reach early settlements with victims. Future medical expenses refer to treatment costs paid in advance for additional treatment expected after treatment is concluded. The Financial Supervisory Service plans to finalize the notice after gathering industry opinions.
The Ministry of Land, Infrastructure and Transport (MOLIT) on Jun. 6 gave notice of a proposed amendment to the Enforcement Rule of the Guarantee of Automobile Accident Compensation Act. The amendment requires minor-injury patients classified at grades 12 to 14 who suffered traffic accidents to submit items such as a medical certificate, progress records, and accident impact when the treatment period exceeds 8 weeks. After that, the insurer's review will determine whether to extend or halt the payment guarantee.
The Financial Supervisory Service anticipated the amendment would soon be finalized and prepared the terms revisions in advance. Although it is customary to revise policy terms after enforcement rules under the purview of the Ministry of Land, Infrastructure and Transport (MOLIT) are finalized, the move is seen as a preemptive step amid growing pressure to raise automobile insurance premiums.
Recently, automobile insurance loss ratios have risen sharply. Non-life insurers, in line with the authorities' inclusive-finance stance, have lowered auto insurance premiums every year since 2022. Last year they cut them by up to 3%, and this year by 0.6% to 1%.
As a result, as of last month, the cumulative automobile insurance loss ratio of the five major non-life insurers—Samsung Fire & Marine, Meritz Fire & Marine, DB Insurance, Hyundai Marine & Fire Insurance, and KB Insurance—was tallied at 86%, up 3.7 percentage points (p) from a year earlier. In the insurance industry, loss ratios in the 80% range are generally considered the break-even point for automobile insurance.
Insurers are expected to post losses in automobile insurance this year, following last year. Next year, automobile repair labor rates are set to rise 2.7%, and the loss ratio is forecast to worsen further. Large non-life insurers have recently asked the Korea Insurance Development Institute to verify auto premium rate changes, and an increase in the low-to-mid 1% range is expected.