Auto Insurers Face Delay in Plan For Statistically Based Premiums

The government is having second thoughts on allowing auto insurance agencies to set premiums based on the accident rates in different regions.

The differential pricing issue is becoming more controversial as the government's August deadline to deregulate car insurance pricing nears. Some insurance agencies, citing the restrictions on premiums, have been refusing to sell insurance in areas with high accident rates.

"The ratio of insurance premiums to payouts differs by as much as 2.4 times from region to region," a business professor at Kyong Hee University, Lee Bong-ju, said . "Regional factors should be integral in setting premium prices, but they are not used because of social and cultural resistance."

A finance professor at Dong-Eui University, Chung Jung-young, said that the industry has a lot of catching up to do. "Upon the liberalization of insurance pricing," he said, "we need to study how to factor in things like region, mileage, car characteristics and the sex of drivers."

But the Financial Supervisory Service said setting premiums based on regional factors would be unfair to less developed parts of the country.

"The differences in accident rates arise from uneven regional development," an official at the regulatory agency said. "The benefits of allowing discriminatory pricing are not worth the drawbacks."

by Choi Hyeon-chul