Policyholders hit roadblocks with new insurance plans
As drivers rush to beef up their insurance plans in the wake of tougher penalties for traffic violations, the Financial Supervisory Service (FSS) is warning consumers to educate themselves on both the new laws and the new policies being offered.
A recent revision to Korea's traffic laws has created stiffer penalties for serious driving infractions, particularly those that cause injuries or death. In response, insurance companies are offering policies with increased coverage limits.
The number of new insurance policies have skyrocketed, according to the FSS, with more than 830,000 customers signing up for driver's insurance in April alone — more than double the average amount of new policies from January through March.
“Sign-ups for driver’s insurance more than tripled in April compared to a month earlier, increasing from 40,000 in March to 135,000 in April,” said a spokesperson from KB Insurance.
In Korea, car insurance covers civil liabilities in the event of an accident, such as car repairs. Driver’s insurance, on the other hand, guarantees payment for criminal liabilities, including government fines. Before the revised bill, most car owners considered driver’s insurance to be optional.
Called the Min-sik Law, the traffic law revisions were intended to enhance safety protections for children in school zones, while strengthening the punishments for violations. It was named after the child Kim Min-sik, who was killed near his elementary school by a speeding car in 2019 in Asan, South Chungcheong. The law went into effect on March 25.
The revision requires increasing the presence of speed cameras and traffic lights while creating a school-zone speed limit of 30 kilometers (17 miles) per hour. Among the heavier punishments, drivers who are responsible for the death of a child under 13 face up to life in prison. Those who injure a child while violating school-zone regulations face up to 15 years in prison and a maximum 30 million won ($24,400) fine.
While the Min-sik law enjoyed broad public support, opinions differ on whether the level of punishment is reasonable.
Critics have characterized some of the punishments as heavy-handed, as violators could face the same level of punishment as drivers who caused accidents while driving under the influence. They also claim the law puts too much responsibility on individual drivers, even for unexpected or unavoidable accidents that can happen in such zones.
With the hike in penalties, insurance companies have rolled out changes to driver's insurance plans, including options to cover accidents that violate the Min-sik Law.
But the FSS said it is now seeing an uptick in consumers who report that insurance companies are exploiting the information gap since the new law took effect.
The agency pointed to the experience of a 50-year-old business owner surnamed Park, who said he signed up for a second driver’s insurance on top of the one he already had, following advice from his insurance planner. Each had a coverage limit of 10 million won.
Park was involved in a car crash a couple of weeks later. The court fined Park 10 million. He expected to receive 10 million from each plan, but because the law prohibits policy holders from double-dipping, he received only 5 million won from each policy.
The FSS noted that Park could have saved money on his insurance premiums had he simply raised the coverage limit for his existing driver’s insurance.
Top insurance companies, including KB Insurance, Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance and DB Insurance, have increased their maximum coverage limits to 30 million won, to align with the top fee stipulated in the bill.
The FSS advised the public to check if they can raise the limit before canceling one’s existing insurance and signing up for a new one, if they plan to avoid unnecessary spending on insurance.
The FSS also pointed out that driver’s insurance will not cover fines and settlement fees from hit-and-run cases and accidents caused under the influence or without a driver’s license.
For drivers who purchase special options that cover settlements, the insurance company has the right to make payments to the victim up-front. It can also work the other way around, where the insured person pays for the settlement first and gets reimbursed later.
Those who are only looking for coverage on car accidents, the FSS advises they sign up for regular insurance plans rather than ones offering a refund at maturity, which can be double the price of regular plans.
BY JEONG YONG-HAWN, KANG JAE-EUN [firstname.lastname@example.org]