Insurers wrangle cheaper repairs for imported cars

Insurance premiums are set to drop for the first time in four years as Korean insurers have managed to lower the cost of repairing imported cars.

The move comes just weeks after reports emerged that such repairs often cost five times as much as similar repairs on domestically manufactured vehicles, and can even cost more than the original purchasing cost of the model itself.

Insurance companies said the premiums will be reduced by around 2 percent to 2.5 percent, as they indicated late last month.

However, the latest development means they will face easing pressure in their auto insurance businesses, which have seen chronic losses mount up in recent years.

A spokesperson for Samsung Fire & Marine, the largest general insurer by asset in Korea, confirmed yesterday that the company reached agreements late last year with leading foreign brands including Mercedes-Benz, BMW and Audi to cut the costs of auto parts by 19 percent, 5 percent and 10 percent, respectively.

Other general insurers, such as Hyundai Marine & Fire, Dongbu Fire & Marine and LIG Insurance, said they had already struck similar deals or were in the process of doing so.

Samsung Fire & Marine is reportedly now in talks with auto importers about adjusting the cost of repair parts for Japanese automobiles as well.

The news comes after auto insurers shelled out record repair fees in 2011. According to the Korea Insurance Development Institute (KIDI), general insurers paid a total of 4.5 trillion won ($4.02 billion) in car repair costs during the fiscal year ending March 2011. The number has risen steadily from 2.7 trillion won in 2006.

“Car repair costs have skyrocketed as Koreans drive more high-end cars with expensive, cutting-edge safety features. There has also been an increase in the number of foreign cars here, which have a much higher repair cost than domestic cars,” said KIDI.

KIDI data from last December shows that the average repair cost for a foreign car involved in a low-speed collision was 5.3 times more expensive than for a domestic car.

“General insurance companies have been prompted by the government to cut their auto insurance premiums by just over 2 percent from April. This is expected to cause industry-wide loses of 500 billion won or more in the auto insurance business this year,” said a spokesperson for a direct general insurer.

By Lee Jung-yoon [joyce@joongang.co.kr]