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Newsletter | July 2016, Issue 2
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INSURANCE
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Amendments to the Standard Automobile Insurance Policy Form
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In light of the recent issues concerning the increase in car insurance premiums,2 the Financial Services Commission (“FSC”), the Financial Supervisory Service (“FSS”), the Ministry of Land, Infrastructure and Transport (“MOLIT”), and other government authorities recently announced a joint “Plan for Adjustment of Automobile Insurance for High-Priced Cars”3.
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As a result, the FSS confirmed the revised draft of the “Standard Automobile Insurance Policy Form.” Upon completion of the public notice period, and deliberation by the Regulatory Reform Committee at the National Assembly, on April 1, 2016, the Standard Automobile Insurance Policy (as amended) was implemented and became immediately effective.
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Main changes to the Standard Automobile Insurance Policy Form are:
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1. Improved Standards and Reduction in Rental Fees under Automobiles
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To prevent leakage in the insurance claim payment due to excessive rental fees,4 the automobile standard policy form was amended to provide for: (1) rental fees only if a driver uses a rental car company that is officially registered with a local autonomous entity; and (2) only the minimum for car rental fees that is of similar displacement volume and model year of the insured’s damaged automobile5.
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2. Requirement of Actual Maintenance and Repair Costs to Prevent Leakage in Insurance Claim Payments
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Until recently, if consumers sought prompt payment of automobile insurance claims for maintenance and repairs, insurers customarily paid such claims in cash.
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The relevant rule was amended so that, in principle, collateral for damages to a policyholder’s automobile is used to repair costs only where the automobile was actually repaired.
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These concerns were mainly due to excessive car maintenance and fees for high-priced car rentals. Also, there have been concerns about the unequal calculation of fees for high-priced automobiles compared to low-priced automobiles (in relation to temporary loaner cars during the repair of an insured’s car)
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The agencies had issued a collective announcement on November 19, 2015.
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When seeking temporary use of rental cars as a “loaner car” when an insured’s car is being repaired
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This is in contrast to payment or reimbursement of rental fees based on the insured’s damaged car’s make and model (regardless of its model year).
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