Driver Insurance Sales Drop as Legal Fee Coverage Shrinks
The sharp contraction follows regulatory changes designed to reduce legal fee payouts and curb insurance claim inflation.
Lower Coverage Limits Reduce Initial Premium Revenue
The steep decline in sales corresponds directly with a drop in initial premium revenue.
Insurance experts attribute the drop to the reduction of coverage limits within the lawyer appointment fee special contract. Last November, the Financial Supervisory Service recommended that insurers introduce a 50% co-payment rate on legal fee riders for drivers. Previously, insurers offered these riders with maximum limits ranging between 3000 to 5000만원. Under the revised structure, policyholders must absorb a substantial share of actual legal expenses out of pocket.
| Metric (Jan-Aug) | Prior Year | Current Year | Change |
|---|---|---|---|
| New Contracts | 2,865,000 | 1,612,000 | -43.7% |
| Initial Premium Revenue | 65,882,010,000 KRW | 37,140,920,000 KRW | -43.6% |
Regulators Curb Inflated Legal Fee Payouts
The regulatory intervention aimed to address a rapid escalation in legal fee payouts driven by inflated claims. Data from five major property and casualty insurers shows that payouts under lawyer appointment fee riders quadrupled from 14.6 billion won in 2021 to 61.3 billion won by 2024. As legal costs climbed, regulators stepped in to prevent unnecessary legal expenses and policy abuse.
While the policy changes successfully suppressed over-payments, they simultaneously eroded the core appeal of driver’s insurance products. The introduction of co-payments and limits broken down by trial tier made the coverage less attractive to prospective buyers. An industry representative noted that because driver’s insurance rarely introduces novel coverage benefits, the mandated cuts directly suppressed sales activity across sales channels, according to etnews.com.