Auditor calls for legal framework to address accident insurance payout disparities

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Auditor calls for legal framework to address accident insurance payout disparities

Published: 16 May. 2025, 11:36 Updated: 18 May. 2025, 18:07

Audio report: written by reporters, read by AI

A car accident that occurred on May 4 in Hampyeong in South Jeolla [HAMPYEONG FIRE STATION]

In Korea, the first advice you get when you get your driver's license is: If you get hit in a traffic accident, check in for medical treatment quickly — and stay for as long as you can.

That was the advice that Yoo, a 42-year-old office worker, also got before getting rear-ended while waiting at a traffic light last year.

Yoo sought physical therapy at a nearby traditional Korean medicine clinic for persistent lower back pain. As the number of sessions grew, the at-fault driver’s insurer offered him 1 million won ($715) on the condition that he make no further claims.

“I wasn't getting treatment just for the settlement,” Yoo said, “but I realized why people say to keep receiving treatment after a car accident.”

A Board of Audit and Inspection (BAI) report released Wednesday revealed that Korean insurers are making “future treatment” payouts — settlement money ostensibly meant to cover ongoing care — without standardized guidelines, causing substantial financial leakage in the auto insurance sector.

According to the BAI’s review of insurance services including health, indemnity and auto insurance, insurers paid 1.75 trillion won in future treatment payouts in 2023, accounting for 46.8 percent of all treatment-related payouts that year. The amount nearly matched the total reimbursed for actual hospital treatments, which stood at 1.91 trillion won.

The amounts varied widely. A sample of 2,645 cases across 12 insurers revealed extreme discrepancies in payouts for similar injuries. One insurance company paid as little as 102,000 won and as much as 6.56 million won for patients with grade 14 sprain injuries, a more than 64-fold difference.

“The longer treatment drags on, the more it costs the insurer, so they offer a lump-sum payout in exchange for no further claims,” an industry source said. “Patients know that holding out leads to a higher amount.”

The purpose of these payouts is also unclear. The audit found that in 2022, 15 trillion won, or 83 percent, of future treatment payouts went to patients with minor injuries — grades 12 to 14 — that do not require long-term care. Of the 1.44 million people who received future treatment payouts between 2019 and 2022, only 15.8 percent, or 227,000 people, returned for further treatment within six months for the same diagnosis.

Double-dipping was also an issue. Korean law prohibits receiving both insurance payouts and National Health Insurance Service (NHIS) benefits for the same treatment costs. Yet, from 2019 to 2022, an average of 370,000 people per year received a combined 476.9 billion won in future treatment payouts — while also drawing 82.2 billion won in NHIS-covered treatment expenses.

“Much of this appears to be duplicate compensation,” the BAI said.

An investigation of 14 nonlife insurers found that from January 2022 to June 2024, NHIS overpaid 61.1 billion won in benefits to 32,000 people for whom insurers could still be pursued for reimbursement. However, the NHIS could not track these cases due to a lack of data-sharing with insurers.

The BAI urged the Ministry of Land, Infrastructure and Transport and the Financial Services Commission (FSC) to establish a legal framework and standards for future treatment payouts and to facilitate data-sharing between the NHIS and insurers to prevent duplicate compensation.

“We are moving to ban future treatment payouts for minor injuries and to codify clear criteria for severe cases in standard insurance contracts,” said an FSC official.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM NAM-JUN [[email protected]]