Auto Insurance on the Brink: Minor Injury Costs Surge, Sparking Urgent Industry Concerns
Seoul, South Korea – A looming crisis is gripping South Korea’s auto insurance industry, as escalating medical expenses related to minor injuries are pushing companies towards substantial financial losses. This isn’t just an industry problem; it’s a potential hit to the wallets of drivers across the nation. The situation is so critical that industry experts are warning of a deeply entrenched pattern mirroring issues seen in other types of loss insurance, demanding immediate attention and systemic reform. This is breaking news with significant implications for anyone who drives in South Korea.
The Rising Tide of Minor Injury Claims
For years, auto insurance companies have absorbed increasing costs, accumulating a deficit exceeding 7 trillion won (approximately $5.3 billion USD) over the past 15 years. This year alone, a further 600 billion won ($455 million USD) loss is projected. But the core of the problem isn’t catastrophic accidents; it’s the ballooning expenses associated with seemingly minor injuries – classified as levels 12 to 14. A recent analysis reveals a startling disparity: the top 3% of patients with these minor injuries rack up medical bills averaging 4.72 million won ($3,580 USD) per person, more than five times the overall average of 900,000 won ($683 USD).
(Graphic illustrating the disparity in medical expenses for minor injuries)
Between 2015 and 2024, medical expenses for minor injuries soared by 88.9%, reaching 3.3 trillion won ($2.5 billion USD). In stark contrast, expenses for seriously injured patients (levels 1 to 11) only increased by 2.3% during the same period. This shift is dramatic: minor injury claims now account for 71% of all personal injury insurance payouts, up from 57% in 2015. The average premium per minor injury patient has jumped nearly 80%, outpacing the increase for seriously injured individuals by a factor of five.
Oriental Medicine Costs Lead the Charge
Digging deeper, the surge in costs is heavily linked to the increasing prevalence – and expense – of Oriental medicine treatments. From the first half of 2024 to the first half of 2025, Oriental medicine costs for minor injuries jumped 9.9% to 413.1 billion won ($314 million USD), while Western medicine expenses only rose 5.7%. The cost per patient for Oriental medicine treatment is a staggering 1.07 million won ($812 USD), three times higher than Western medicine at 320,000 won ($243 USD).
(Graphic illustrating medical expenses for a level 14 injury patient)
One key concern is the overuse of MRI scans, particularly within Oriental medicine hospitals. One hospital was found to be performing MRIs on 34.6% of minor injury patients – 2.5 times the average for all Oriental medicine hospitals. This suggests a pattern of excessive imaging, fueled by the fact that auto insurance covers these costs without requiring patients to pay out-of-pocket. Furthermore, “set billing” – billing for multiple procedures at once – is becoming increasingly common, with a 20 percentage point increase from 2020 to 2024.
The Ripple Effect: Premiums and Loss Ratios
These escalating costs are directly impacting loss ratios – the percentage of premiums paid out in claims. Industry analysis shows that every 100 billion won ($76 million USD) increase in insurance premiums translates to a 0.51 percentage point increase in the loss ratio. With the current loss ratio already in the mid-to-high 80% range, and premiums frozen for four years, the industry is facing immense pressure. The projected 600 billion won ($455 million USD) deficit this year underscores the urgency of the situation.
This isn’t just about insurance company profits. A financially unstable insurance system could lead to higher premiums for drivers, reduced coverage options, and ultimately, a less safe and accessible transportation landscape. Understanding these dynamics is crucial for anyone navigating the roads – and their insurance policies – in South Korea.
Industry officials are sounding the alarm, warning that the current structure – where a small number of excessive treatments are destabilizing the entire system – is becoming deeply ingrained. Strengthening screening processes and reforming the Oriental medicine treatment system are seen as essential steps to reversing this trend and ensuring the long-term viability of auto insurance in South Korea. Stay tuned to archyde.com for continued coverage of this developing story and expert analysis on the future of auto insurance.
Reporter Bae Gyu-min [email protected]
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