Auto Insurance Loss Ratio Soars... '8-Week Rule' to Curb Overtreatment Faces Endless Delays

Loss Ratio Hits 84.7% as Monsoon Season Looms, Increasing Insurers' Burden

Implementation of "8-Week Rule" Delayed; Cabinet Procedures Still Pending

Over 90% of Patients Treated for More Than 8 Weeks Receive Traditional or Integrative Medici

The automobile insurance loss ratio is surging once again. The burden of increased labor and parts costs is mounting, and with the rainy season approaching, there are growing concerns about a rise in vehicle flooding and accidents on wet roads, further intensifying the upward pressure on loss ratios. The so-called 'eight-week rule', which was expected to help improve the loss ratio, has seen its implementation repeatedly postponed due to delays in the legislative amendment process.

According to the non-life insurance industry on June 24, the cumulative automobile insurance loss ratio for the four major non-life insurers—Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance—stood at 84.7% as of May this year. This figure is up 1.9 percentage points from 82.8% during the same period last year. The automobile insurance loss ratio represents the percentage of insurance claims paid relative to the premiums collected by insurers. The industry generally considers around 80% as the break-even point when factoring in business expenses.

The rise in the loss ratio is being attributed to the limited effect of premium hikes, combined with the lingering impact of previous premium reductions. Non-life insurers lowered automobile insurance premiums by around 7–8% from 2022 to last year. Although premiums were increased by about 1% this year, it is explained that this is insufficient to offset the accumulated premium reductions and increased cost pressures. The industry is concerned that the loss ratio could deteriorate further during the rainy season, as wet road accidents and flood damages are expected to rise.

Even a 1 percentage point increase in the loss ratio leads to a significant rise in costs for non-life insurers. Considering that last year’s revenue from the automobile insurance market—namely, direct written premiums—was about 20 trillion won, it is estimated that every 1 percentage point increase in the loss ratio adds approximately 200 billion won in losses. An industry official stated, “Given the size of the automobile insurance market, even a 1 percentage point difference in the loss ratio is a substantial burden for the entire industry. If the current upward trend in the loss ratio continues, pressure to raise premiums will inevitably increase.”

With the loss ratio continuing to rise, the non-life insurance sector is calling for the prompt implementation of the 'eight-week rule', which aims to reduce insurance payout leaks. The eight-week rule is a system requiring automobile accident patients with minor injuries to submit an additional medical certificate if they receive treatment for more than eight weeks. Such patients are classified as having injury grades 12 to 14 from automobile accidents, typically involving relatively minor injuries such as sprains or contusions.

The industry expects that introducing the eight-week rule will enable a more objective assessment of the necessity for long-term treatment, thereby reducing both excessive medical care and insurance payment leakage. According to the General Insurance Association of Korea, last year, 90.3% of minor injury patients at the four major non-life insurers who received treatment for more than eight weeks opted for Korean medicine or integrated Korean and Western medicine, and their treatment costs accounted for 95.5% of the total. The industry views such prolonged treatments as a contributing factor to the rise in automobile insurance loss ratios.

The timing for the implementation of the eight-week rule, which was initially expected to be introduced in the first half of this year, remains uncertain. The insurance sector has prepared related detailed regulations in line with amendments from the Ministry of Land, Infrastructure and Transport, but cannot implement the system as the higher-level legislative amendments have yet to be completed. In order to introduce the eight-week rule, amendments to the Enforcement Decree and Enforcement Regulations of the “Automobile Accident Compensation Security Act”—under the jurisdiction of the Ministry of Land, Infrastructure and Transport—must be made first.

An official from the Financial Supervisory Service said, “If we do not announce the detailed regulation amendments in advance, it may be difficult to coordinate the timing of implementation once the Ministry of Land, Infrastructure and Transport completes its legislative amendments. The Legal Affairs Office review has already been passed, and I understand that procedures such as approval by the Cabinet meeting remain.”

With the introduction of the system delayed, non-life insurers are taking steps to manage their loss ratios independently. They are verifying the appropriateness of medical care and reinforcing meetings with attending physicians at medical institutions where long-term hospitalization or treatment occurs. A representative from DB Insurance stated, “For cases involving long-term hospitalization or treatment, we are strengthening interviews with the attending physicians at the respective medical institutions and closely reviewing whether such extended treatment is genuinely necessary.”

This content was produced with the assistance of AI translation services.