FSS plans car insurance reforms

The nation’s financial watchdog plans to overhaul the auto insurance fee system to make fines proportional to responsibility in accidents and expand compensation related to deaths or disabilities from collisions.

The Financial Supervisory Service (FSS) on Monday said it will begin raising auto insurance premiums more sharply on drivers who are deemed more responsible for an accident when there’s blame to share, while the less-responsible driver will see a smaller increase.

The FSS plans to develop its system to calculate insurance premiums by the end of the year, which will take into account the specifics of each case. The watchdog is currently collaborating with local insurance companies on the design of the system.

“It’s not fair that more responsible drivers end up with the same increases in their premiums as the other, more reckless party,” said Kwon Soon-chan, deputy governor at FSS, at a press conference on Monday. “We hope the new system will encourage reckless drivers to be more careful.”

Currently, all drivers involved in a car accident will see their premiums rise by the same level the following year regardless of who was more responsible for the collision.

The new system is part of the FSS’s 20 financial reform projects for the year that was first announced last month. They aim to make insurance regulations more consumer-friendly, particularly auto insurance, which is among the most commonly subscribed insurance products. The number of auto insurance subscribers reached nearly 20 million as of the end of last year.

The reforms also includes raising the ceiling on financial compensation for the families of those killed in car accidents, from the current 45 million won ($39,105) to 100 million won, in response to recent cases in which judges deemed the amount too low but were unable to award more because of the regulation.

The compensation ceiling for those disabled in car accidents will also be increased from the current 31.5 million won to account for increases in costs of medical care, the FSS said.

Starting this August, local insurance companies will be required to pay for settlement costs as soon as an accident occurs. Currently, those involved in an accident have to pay all costs out of pocket and then wait for reimbursement after everything has been concluded, forcing some to take out last-minute and high-interest loans.

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]