FSC to limit ‘high’ insurance payments for high-end cars

South Korean financial authorities are pushing to reduce the “excessive” insurance payments to owners of high-end cars involved in an accident, officials said Wednesday.

For this, the Financial Services Commission plans to change relevant regulations on the insurance-covered repairing and compensation of damaged vehicles.

“The rising number of luxury cars, especially the foreign-brand vehicles, has triggered a number of unfair practices in car insurance coverage,” said FSC director Lee Dong-hoon in a press briefing.

Lee said the government expects that the new policies will save car insurance companies some 200 billion won ($170.6 million) per year.

The move follows a recent series of widely-publicized incidents where owners of expensive, imported cars were strongly criticized for running up high repair costs, causing the insurance bills of those at fault to go up.

Such incidents prompted a public uproar especially as some of those at fault were said to be ordinary people with standard domestic cars that only cost a fraction of what their insurance companies had to pay to repair a simple bumper or a door of cars they damaged.

Financial Supervisory Service officials said it will help prevent such cases by prohibiting car owners from demanding a replacement of parts damaged in what it called “trivial” accidents, such as fender benders.

What will be considered trivial will be determined through tests before the end of the year, FSS officials added.

Also, the financial authorities will ban direct cash payments by insurance companies to car owners to make sure that insurance payments are made only for actual, verified repair work.

The watchdog said rental services were another major cause of the high repair costs of high-end cars.

Currently, those who demand rental cars for use while their damaged cars are being repaired are allowed to rent a car of the same class and year from the same manufacturer.

By Chung Joo-won (joowonc@heraldcorp.com)