Luxury Cars Are Expensive to Repair

The insurance premiums for the owners of cars priced at over 50 million won are expected to go up.

The Financial Supervisory Service is planning to take measures in the fourth quarter so that the owners of cars priced at over 50 million won pay more insurance premiums and the rest can pay less. This is because the repair costs of those more expensive cars, imported cars in many cases, are more than twice those of the rest and the repair cost burden on the former has been shifted to the latter to some extent.

At present, an additional premium of 3 to 15 percent is applied to the owner of a car requiring a repair cost equivalent to 120 percent or more of the average repair cost. The insurance premium range is likely to be adjusted upward.

According to the Financial Supervisory Service, in the first half of this year, 117,737 repairs were conducted for imported cars, 575,833 for domestic, and the repair cost per case was 3,622,480 won in the former group and 1,623,040 won in the latter. This difference is mainly because parts in imported cars are much more expensive.

In the second quarter, the domestic car-related insurance loss ratio was 66.7 percent and that related to imported cars was 69.3 percent. Payments from insurers to imported car owners totaled 400.8 billion won in the first half of 2021 and rose 6.4 percent to 426.3 billion won in the first half of this year. The payments and loss ratio rose despite a 14.1 percent decrease in accidents.

Under the circumstances, car insurance companies are trying in various ways to reduce their loss ratios. For instance, DB Insurance recently signed an MOU with Amass to better inspect imported auto parts and improve its insurance processing automation. Amass is a startup providing artificial intelligent-based car damage assessment and repair cost estimation services. Hyundai Marine & Fire Insurance and Chabot Mobility signed an MOU in April for overall system improvement.

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