The Problems and Suggestions of Possible Improvement of the Current Car Insurance in Korea: Focusing on the Compensation of Personal Injury

Korean auto insurance industry has experienced serious difficulties due to market saturation, high loss rate and price regulations by authority. There have been various efforts to overcome the current difficult situation through the improvement and reform of automobile insurance system in Korea. In this context I have a very keen interest in Accident Compensation Act of New Zealand. New Zealand has an unique compensation scheme, so called ‘No-fault scheme’, for the injured people by accident including motor accident.

40 years ago, the New Zealand legislated ‘Accident Compensation Act’ by operated ACC for accomplishment the responsibility of society for the injured. In this paper, I will analysis the current situation and problems of Korean car insurance and examine NZ’s ACC. Thereby, I want to have useful implications for the reform of Korean automobile insurance system.

This article will focus on compensating personal injury caused by car accident. Korean car insurance has several problems related in personal injury compensation. There are: Insufficient compensation for the victims, Inadequate compensation for the insureds, Increasing in lawsuits against insurers and Expensive medical fees.

There are two ways in approaching the reform of the current Korean compensation scheme for physical injuries. Firstly, maintaining the framework of the tort law compensation system and the liability insurance in order to strengthen the social security through social welfare and social insurance. On the other hand, the compensation for a physical injury issues to be handled only by the social insurance process. The compensation system that acclimatized to the principle of liability with fault may be difficult to change it to the no-fault system straight away in the first place. However, it is important to take a step by step. Looking from the long term perspective, those steps will later shift from the fault based compensation system to the no-fault based compensation system; make worker’s compensation scheme and the accident compensation scheme unified; and finally it will become one entity system like New Zealand where all accident injuries covered under the ACC which are governed by the Accident Compensation Act.

New Zealand's universal injury compensation scheme might resolve the problems of overlapped compensations by social insurance and private insurance and of different charges for medical treatments. And also it provides prompt compensations for injured persons and operates efficiently because all the processes take place in the one entity.

In these respects this study on the New Zealand's accident compensation scheme will contribute to social cost reduction of the operation of auto insurance system in Korea.