The financial authorities will relaunch efforts to promote repairs using quality-certified parts to curb factors driving auto insurance premium hikes. The financial authorities pushed last year to prioritize the use of quality-certified parts for car repairs but withdrew the plan after backlash from politicians and consumer groups.
According to the financial sector on the 30th, the Financial Supervisory Service plans to curb factors driving auto insurance premium increases this year by introducing special clauses that give upfront premium discounts when using quality-certified parts. When signing an auto insurance policy, if a special clause is added to use quality-certified parts for repairs, the premium is discounted. Although details have not been finalized, options under discussion include limiting the discount to exterior parts less related to driving, such as bumpers, hoods, and fenders, and offering about a 10% premium discount.
Quality-certified parts are components the government has certified under the Motor Vehicle Management Act to be used as substitutes for parts installed on vehicles shipped by automakers. Compared with original parts, their performance and quality are the same or similar, but the price is only about 60%, so using them significantly reduces car repair expense.
Insurers already offer special policies that refund consumers the difference in parts costs if they use quality-certified parts for car repairs, but actual usage is rare. In response, the financial authorities last year sought to revise the standard auto insurance terms to pay claims based on quality-certified parts. The idea was to base claim payments on the parts that incur the lowest repair expense, namely quality-certified parts.
However, consumer groups pushed back and the National Assembly raised concerns, so the rollout was canceled and the approach shifted this year to introducing upfront discount riders.
The auto 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 86.2%. The auto insurance loss ratio is the total of claim payouts divided by premiums. In the insurance industry, a loss ratio in the 80% range is generally viewed as the auto insurance break-even point.
An industry official said, "It seems many consumers believe they lose out if they pay the same premium and get repairs with quality-certified parts."