Gov't likely to charge higher insurance rates on import cars

SEOUL, Feb. 5 (Yonhap) -- The government is revising auto insurance policies for imported vehicles to help prop up local car insurers suffering from falling profitability, financial authorities said Friday.

The authorities are planning to allow auto insurers to charge higher insurance
rates by letting them determine premium amounts for drivers of foreign cars based
on vehicle model, according to a high-ranking official at the Financial
Supervisory Service (FSS).
"Authorities are pushing to adopt a vehicle-model-based rate system to let
(insurers) charge appropriate premiums on imported cars," said an FSS official.
Currently insurance premiums on imported cars are calculated in accordance with
vehicle brand. The shift to the model-based plan raises the current seven-point
rate scale to 11, making imported cars subject to the same rating standard as
domestically made automobiles.
The decision comes as auto insurers grapple with falling profitability as a
result of loss ratios for import vehicles. The rate indicates losses paid out in
claims against total premiums earned.
Local auto insurance companies recorded a 90.3 percent annual loss ratio for
imported cars in fiscal 2008, compared with 69 percent registered for locally
manufactured vehicles.
Insurers pay out more compensation following accidents involving imported cars
because it is more expensive to secure parts for repairs.
"The new measure may take effect as early as April 1 if preparations are promptly
completed," the official said.
As of the end of 2009, 425,330 imported cars were on the road, compared with a
total of 17.3 million cars registered with the government.
pbr@yna.co.kr
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