Insurance payments conceal real cost of luxury vehicle repairs

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Insurance payments conceal real cost of luxury vehicle repairs

It’s no secret that many drivers in Korea make an extra effort to avoid making contact with high-end imported cars.

But the actual repair cost may only be a part of the financial headache following an unfortunate collision.

A recent study has revealed numerous cases where the cost insurance companies pay on the rental service provided to owners of imported cars that were damaged was much more than the actual cost of fixing their cars. The cost will eventually be passed on to average insurance subscribers who will pay through more expensive policies.

According to a report provided by Saenuri lawmaker Park Dae-dong on Tuesday 52.5 percent of accidents involving imported brands ended with the car rental cost exceeding half the cost of the repairs. This is more than the 25 percent of cases that only involve accidents between Korean vehicles.

Last year, the report said, insurance companies paid 135.2 billion won on rental services for imported cars owners although the total number of imported cars, at 1.11 million, only accounted for 5.5 percent of the cars that were involved in accidents. That cost was 31 percent of the total rental payment paid out by the insurance companies.

The average insurance payment imported car owners pay to their insurers was 1.15 million won last year. That is twice the size of the 620,000 won average owners of Korean vehicles pay for their insurance. The average cost of repairing imported cars, at 2.75 million won, was almost three times more than Korean cars, at 950,000 won.

The average car rental cost for imported cars was much larger as they averaged 1.37 million won, while it only cost 390,000 won for Korean cars.

The report was based on data provided by the Korea Development Institute.

The study cited an example of a truck driver who scratched the side of a parked 2002 BMW 7 Series car last year.

The driver decided to pay the damages as well as the rental service that the owner of the BMW would use with his insurance. However, when the truck driver received the detailed bill on the repairs and rental car service he was shocked. It cost 6.94 million won for rental car services alone during the 28 days that the BMW owner used them while his car was being repaired. The original charge was 10 million won but the insurance company negotiated the price down. The bill for the actual damage repair was 8 million won.

Under current automobile insurance law, the owner of a car that has been damaged can rent a similar model, regardless of the manufactured year. The BMW owner in the example, was able to borrow the latest high-end imported car of the same level. As he wasn’t able to rent a BMW 7 Series he drove a Mercedes S500 for the 28 days.

“Protecting the rights of imported car owners is something that is obvious,” said Park. “However, if the cost [of rental] is excessive compared to Korean vehicles it would increase the burden of all insurance policy subscribers and therefore it is necessary to come up with rational measures.”

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