As policy-driven benefits expand — including a vehicle five-day rotation discount rider and broader gasoline discounts — insurers and credit card companies are facing rising costs. While the discounts are billed as support for household finances, critics say the structure repeatedly leaves financial firms to absorb the expense.
According to financial authorities on the 27th, the five-day rotation rider offers private auto insurance customers a 2% annual premium discount. Drivers limit use of their cars on designated weekdays based on license plate numbers, then receive a refund at policy expiration for the period they complied. For an annual premium of 700,000 won, the refund is about 14,000 won.
Insurers, not the government, pay for the discount. Because the program is policy-driven, participation is effectively unavoidable for insurers, and the burden grows as more customers enroll. The industry warns the effect of premium hikes implemented earlier this year could be offset, or turn into added costs.
Signs of weakening profitability are also emerging. The first-quarter auto insurance loss ratio at major nonlife insurers — Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance and KB Insurance — rose to 85.9%, up 3.4 percentage points from a year earlier. Auto insurance is estimated to have posted a deficit of about 130 billion won over the same period.
Additional costs tied to operating the rider are another variable. Insurers say they must build and manage systems to verify whether customers drove on restricted days and assign staff to run them, while disputes and complaints over driving records are also possible. Some in the industry have raised the possibility that insurers may need to pay automakers separately to obtain driving data.
Limits of similar policies have surfaced before. A “weekday driving discount rider” introduced around 2008 offered a higher discount rate, but was widely seen as a failure due to low enrollment.
Credit card companies face a similar squeeze. In line with the government’s inflation response, issuers have expanded gasoline discounts, but card companies are bearing much of the cost. Unlike general co-branded cards, they have less ability to split expenses with merchants, pushing up marketing costs.
Profit pressure is intensifying as issuers add fee waivers, cashback and points on top of fuel discounts. Some gasoline discount cards could end up in a “reverse margin” structure, where losses grow as more cards are issued. With higher bond yields raising funding costs, broader discounts add to the strain.
The burden goes beyond the discount itself. Card companies also shoulder added expenses for system overhauls, staffing and building infrastructure to link benefits to prices.
Market response has also fallen short. One card company said new issuance of its gasoline discount card rose by less than 10% from the previous month even after benefits were expanded, suggesting the bigger discounts are not generating enough demand amid weak consumption.
An industry official said, “We agree with the goal of stabilizing people’s livelihoods, but the cost burden is accumulating,” adding, “With funding rates rising as well, management pressure is growing.”
* This article has been translated by AI.
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