Korean insurers are growing frustrated as observers say the "8-week rule," designed to curb excessive treatment for minor injuries in car accidents, is unlikely to take effect in the first half of the year. Industry voices argue that reform is urgent, as insurance payout leakage continues from excessive treatment of light injuries, centered on some oriental medicine hospitals.
According to the financial sector on Wednesday, oriental medicine treatment accounted for 60.4% of total auto insurance treatment costs as of the end of last year, surpassing 60% for the first time on record. The share of oriental medicine costs stood at just 23.0% as of 2015, but after overtaking Western medicine treatment costs for the first time at 54.6% in 2021, it has continued to expand. Insurance payouts for oriental medicine treatment alone reached 1.7 trillion won last year, nearly a fivefold increase over the decade since 2015 (350 billion won).
"It has become entrenched that people head to oriental medicine hospitals before orthopedic clinics, even after minor fender-benders," an insurance industry official said. "Oriental medicine treatment costs are rising rapidly not because the treatment is particularly effective, but because of some medical institutions that keep patients hospitalized for long periods and encourage them to demand higher settlement payments."
As treatment cost leakage in auto insurance worsened due to excessive treatment of minor injury patients, the government has been pushing a reform plan that includes the 8-week rule. The rule requires minor injury patients in injury grades 12 to 14, such as those with simple bruises, to undergo review by the Korea Automobile & Damage Compensation Insurance Promotion Agency if they receive treatment for more than eight weeks.
The 8-week rule was originally scheduled to take effect on Jan. 1 this year, but its implementation has been delayed as the oriental medicine industry opposed it, citing infringement of patients' right to treatment. The revised enforcement decree of the Guarantee of Automobile Accident Compensation Act, which contains the measure, has passed review by the Ministry of Government Legislation and awaits only submission to and approval by the Cabinet. However, some observers say implementation in the first half of the year will be difficult. Amid this, the Korea Automobile & Damage Compensation Insurance Promotion Agency posted and then canceled a notice to hire staff needed for implementing the rule, causing on-the-ground confusion.
As the introduction of the 8-week rule is repeatedly postponed, complaints are emerging within the non-life insurance industry. The burden has grown due to factors such as auto insurance premium discount riders tied to the implementation of vehicle two- and five-day driving restrictions, yet the necessary reform has not been carried out.
As the government restricted auto insurance premium increases over the past four years, the auto insurance sector recorded a deficit of 708 billion won last year. The cumulative loss ratio for the four major non-life insurers — Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance — stood at 85.9% for the January-to-March period this year, up 3.4 percentage points from a year earlier. Insurers typically post deficits when the loss ratio exceeds 80%. Although premiums were raised for the first time in five years, the industry has not escaped the losses accumulated over that period.
In response, opposition has surfaced, with the Non-Life Insurance Sector Headquarters of the Korea Federation of Clerical & Financial Service Workers' Unions issuing a statement urging reform of the auto insurance system. "Implementation has been delayed due to external pressure from certain interest groups, and there is even talk of reviewing it from scratch," said Eom Min-sik, head of the union's non-life insurance sector headquarters. "A vicious cycle is becoming entrenched, in which the moral hazard of fake patients and the unjust extraction of insurance payouts increase the economic burden on many honest policyholders."
In the financial sector, observers say the longer the introduction of the 8-week rule is delayed, the greater the pressure to raise auto insurance premiums will become. For this reason, many in the industry say the system should be introduced quickly. "Discussions on the necessity of the 8-week rule were completed through the government and the industry starting last year, and even the implementation date was set, but it keeps getting postponed due to complaints from certain interest groups," an insurance industry official said. "If the problem of excessive treatment in auto insurance is not resolved, insurers could be driven into a management crisis."
