Insurance Coverage For Cars to Be Freed

The auto insurance market will be fully liberalized by August, the Financial Supervisory Service said Thursday. Insurance for company cars will be deregulated April 1, and insurance for private cars will be opened up in August.

The changes will allow insurance agencies to set premiums purely based on factors such as the drivers' age, insurance history and driving record, the financial regulator said. Agencies are expected to add distinct features to their policies to prepare for the deregulation.

"The change should speed restructuring in the insurance market," an official at the regulatory body said. "Drivers buying policies for the first time will see premiums of about 20 percent lower."

The move follows the initial step of liberalization, carried out last year, that applied to minivans. Insurance rates in that segment fell by 5 percent on average for 80 percent of policyholders after the change. The annual rates offered by agencies for minivans now vary by up to 100,000 won ($78). Some agencies have also introduced a new plan that provides unlimited coverage in return for a 30-percent rate increase.

An official at Samsung Fire & Marine Insurance said that agencies are preparing for the competition. "The rates for better drivers and problem drivers of vans differ by 30 percent," he said. "We expect to see a fierce price war right away after the other changes."

The regulator also said that standard terms of auto insurance policies would be changed April 1 to define in-laws not living in the same household as immediate family for purposes of coverage.

by Lee Sang-ryeul