Auto insurance system needs drastic improvement

SEOUL, Dec. 28 (Yonhap) -- The government is scheduled to announce revisions to
the auto insurance system Wednesday that will call for, among others, imposition
of heavier extra charges on insurance premiums for those who commit car accidents
frequently and provision of expanded discounts in premiums for drivers with no
accidents for an extended period.
Nonlife insurers have been suffering from chronic deficits in their car insurance
business due to extended expenditures from increasing accidents, excessive
repairs of cars and prolonged medical treatment of traffic accident patients
arising from the moral hazards on the parts of some immoral drivers, repair shops
and hospitals.
The revision is expected to alleviate the insurers' deficits substantially as the
imposition of differentiated premiums based on the frequency of accidents will
contribute to a decrease in traffic accidents.
What is important is how to block the leakage of insurance payment arising from
the moral hazard of drivers, repair shops and hospitals. It is nothing new that
some repair shops incite drivers who have car accidents to repair damaged parts
that are not caused by the accident at the expense of car insurance companies.
Some patients from car accidents try to stay in their hospital beds longer than
necessary in order to be paid more insurance money while hospital authorities
tacitly allow the "fake" patients to stay in the hospital for a long time and
rack up costly medical charges.
Industry sources estimate the leakage of insurance payments arising from
excessive repair and medical treatment reached 1.5 trillion won in 2008.
The fake patients are typical cases of insurance fraud. The ratio of
hospitalization of patients from traffic accidents recorded an average 70.4
percent during the period from 2001 to 2007 in South Korea, about eight times
higher than the 8.5-percent rate in Japan during the same period.
The extended burden of auto insurers arising from excessive repair and medical
treatment by some immoral drivers should eventually lead to a hike in premiums.
In other words the "profiteering" by dishonest auto insurance holders is
tantamount to robbing honest drivers of their money.
The government should take fundamental measures to discourage drivers from
causing traffic accidents and eliminating leakage of insurance money.
(END)