South Korea has announced stringent provisions to curb fraud in motor insurance claims and help reduce motor insurance premiums for policyholders.
The new stipulations that came into effect on 26 February 2025 are being implemented to address rampant fraud and excessive payments linked to automobile insurance claims. The new initiatives put in place by the government have been worked out by the Ministry of Land, Infrastructure, and Transport along with the Financial Services Commission and the Financial Supervisory Service. These are rooted in the growing concern over unauthorised claims and the rising cost burden placed on common motorists.
Over the last several years, South Korea has seen alarming trends where insurers have compensated drivers for fraudulent claims, resulting in mounting costs. Since 2023 alone, claims linked to auto insurance fraud have reached staggering amounts, with reports showing payouts exceeding KRW1.4tn ($1.1bn) for minor accident settlements alone.
This trend, if not curtailed, would inevitably lead to increased insurance premiums for out-of-pocket policyholders, many of whom are already feeling the pinch.
The new stipulations aim to strike a balance between care and accountability, ensuring those who truly need assistance receive it, without enabling exploitation of the system.
South Korea's vice minister Baek Won-guk said, "This plan aims to reasonably improve the operational order of automobile insurance, reducing the burden on policyholders and providing reasonable compensation for accident victims."
Such systematic improvements are expected to reduce unnecessary payouts and, as a result, lower insurance costs by approximately 3% for the average customer.
To complement these reforms, the government will also strengthen penal measures against those attacking the integrity of the system. Fraudulent repair shops will now face strict administrative penalties, with first offenders subject to immediate suspension and repeat offenders facing the cancellation of their business registrations altogether. The enforcement of laws distinguishing between minor and serious offenses intends to create clear consequences for misconduct.