'8-Week Rule' for Auto Insurance Nears Implementation: Need to Manage Small Claims Until System Stabilizes

Car Insurance Medical Expenses Have Increased Every Year for a Decade
Insurers Relieved After Turbulent Process to Adoption
Early Management of Outpatient Claimants Needed for Effective Implementation

As early as next month, the so-called '8-week rule' may be implemented, which requires verification of medical necessity when automobile insurance claimants with minor injuries receive treatment for more than 8 weeks. The non-life insurance industry has welcomed the move, saying, "Though it's belated, it's a relief." However, since stakeholders such as practitioners of Korean traditional medicine strongly oppose the change, and during the early stage of implementation, there is a possibility that the number of cases where patients who suffered minor injuries such as sprains and contusions continue outpatient treatment up to 8 weeks and then claim insurance payouts may increase. For this reason, it is expected that more time may be needed before the system actually leads to lower loss ratios. The loss ratio is the percentage of insurance premiums paid out by insurers as claim settlements; the higher the figure, the less profitable the insurer becomes.

According to the insurance industry on August 4, the amended Enforcement Decree of the Automobile Damage Compensation Guarantee Act, which sets the effective date for the 8-week rule as the 10th of next month, has passed the vice-ministerial meeting on July 30, after taking into account the necessary preparation time. Only approval by the Cabinet and the public announcement remain.

The 8-week rule is a new system where automobile accident patients classified in injury grades 12 to 14 (minor injuries) must submit an additional medical certificate and supporting evidence of necessity if they continue treatment for more than 8 weeks after the accident. This rule applies to patients with relatively minor bodily injuries such as sprains or contusions to the neck or lower back. It does not apply to serious cases such as patients with fractures or those who require surgery, whose treatment periods usually far exceed 8 weeks.

The 8-week rule has long been considered a "wish come true" for the non-life insurance industry. While the Ministry of Land, Infrastructure and Transport and the Financial Supervisory Service hinted at its introduction early last year, implementation was delayed for about a year and a half due to opposition from medical groups. The Financial Supervisory Service has determined that the 8-week rule is necessary to regulate patients who, despite only minor injuries, undergo excessively long treatments, file unreasonable claims for insurance payouts, or in the process, participate with medical institutions or brokers in organized insurance fraud.

The non-life insurance industry has also argued for prompt implementation, citing an ongoing vicious cycle driven by some so-called ‘fake patients’—those who exploit ambiguous treatment standards: “leakage of payouts leads to higher loss ratios, which results in lower profitability, insurance premium hikes, and complaints or pushback from policyholders.”

The non-life insurance sector believes that once established, the 8-week rule will have a positive effect by lowering automobile insurance loss ratios and improving profitability for non-life insurers. According to the industry, the average automobile insurance loss ratio for the first half of this year among the four major non-life insurance companies—Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, and KB Insurance—was 84.5%, exceeding the break-even point of 82%. This marks the second year in a row that the loss ratio has surpassed the break-even threshold, following 82.6% in the first half of last year.

Consequently, non-life insurers reported a combined operating loss of 189 billion won in the automobile insurance segment during the first half of this year. This is their first deficit in this sector in six years on a semiannual basis. A key driver behind it is the increase in automobile insurance medical expenses. According to the Health Insurance Review and Assessment Service, automobile insurance medical expenses rose every year over the past ten years, from 1.5558 trillion won in 2015 to 2.8114 trillion won last year.

Nevertheless, the non-life insurance sector remains on high alert, as protests and opposition from the medical community continue to mount in the lead-up to the system’s introduction. Medical professionals claim that the current classification system has issues, as insurers unilaterally determine the injury grades for patients with minor injuries.

Heewon Jeong, head of the Automobile Insurance Patient Rights Solidarity, held a demonstration in front of Cheong Wa Dae Sarangchae for two days starting August 2, arguing, “Even disc herniation, complete tendon rupture, and knee cartilage tears are classified as minor injuries if not operated on. Such patients account for 94.4% of all traffic accident victims. Since insurer employees rather than medical professionals determine injury grades, the proportion of lumbar sprain patients and disc patients is similar in health insurance statistics, but among traffic accident patients, disc patients account for only 0.9%.”

There are also concerns that even after the system is implemented, its initial impact in improving loss ratios may be limited. This is because if patients with minor injuries continue outpatient treatment for the full 8 weeks allowed by the policy and then claim insurance payouts, it is difficult to restrict such practices across the board.

In practice, the Financial Supervisory Service has virtually no authority to conduct informal administrative guidance (such as making recommendations, cooperation requests, or providing guidelines without legal binding force) on medical care or insurance benefit claims taking place at medical institutions. Unless a private insurer’s Special Investigation Unit (SIU) staff carries out undercover investigations or an eyewitness files a report with the Financial Supervisory Service or insurance association, it is hard to identify and sanction fraudulent claimants.

An industry official stated, “The amendment process for the enforcement decree is not yet complete, and even after it is announced, detailed discussion will be required right up until implementation. In order to lower the loss ratio and improve profitability after the new system takes effect, detailed measures must be developed to rationally manage insurance claims by minor injury patients who undergo outpatient treatment for 8 weeks.”

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