SEOUL, Feb. 25 (Yonhap) -- The new government is moving to curb a raise in auto insurance premiums in a bid to reduce policyholders' cost burdens despite a worsening business environment for nonlife insurers, industry sources said Monday.
The Financial Services Commission (FSC), the country's top financial regulator, will apparently talk with new ministries set up by President Park Geun-hye, who had her inauguration ceremony earlier in the day, about ways in which they can turn such a plan into a legitimate policy, an FSC official said.
The local non-life insurance association has reportedly delivered its own proposal detailing possible measures to the FSC, they said.
The focus will likely center on an industry overhaul to bring down prices of parts for imported cars, since the exclusive sales by a few importers have made repair costs too expensive for car owners, hence a higher insurance premium.
According to industry data, imported cars take up 4 percent of the total number of vehicles in South Korea and 12 percent of the auto insurance market.
But as most of their parts are manufactured offshore with a less thorough price standard, their repair costs averaged 3.5 times higher than those of domestic cars.
The Park Geun-hye government, aware of this, deemed it necessary to mend the auto insurance sector, as the move will be in line with her pledge to prop up and better the livelihoods of the middle class.
The FSC will likely look into options, including revising related law, improving the compensation system and bolstering protection of policyholders, officials said.
The move comes amid growing concerns non-life insurers will suffer big losses from insurance payouts in the short future, largely due to a hike in accidents during the unprecedented cold spell last winter.
Insurers estimate their loss rate to reach 103.2 percent for fiscal 2012, the highest in 10 years. Any higher than 77 percent is considered above the break-even point for the industry.
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