The government’s initiative for a vehicle 5-day discount program has sparked a dispute between financial authorities and the insurance industry over legal responsibilities. While the Financial Services Commission (FSC) believes there are no violations of insurance law, insurers argue that they need an official confirmation stating the program is not illegal to avoid future regulatory risks.
On May 21, the FSC communicated to insurers that the vehicle 5-day discount program does not require a non-action opinion. An FSC official stated, "Since the vehicle 5-day discount program is legally sound, there is no need for a non-action opinion." A non-action opinion is an official document issued by authorities confirming that a financial company will not face penalties for a proposed new business.
Previously, Shin Jin-chang, the head of the FSC's office, indicated during the announcement of the discount program that if there were legislative uncertainties, the FSC would actively consider issuing a non-action opinion to ensure smooth implementation of the program. This statement had led the insurance industry to believe that the possibility of receiving such an opinion was open.
The vehicle 5-day discount program offers a 2% discount on premiums to personal auto insurance policyholders who agree not to drive on specific weekdays. The government initiated this program to encourage energy conservation and respond to high fuel prices. Insurers planned to begin accepting applications in May, with a launch scheduled for the end of the month, retroactively applying discounts from April 1.
However, concerns remain in the industry regarding the basis for rate calculations as the program's launch aligns with the policy timeline. Article 129 of the Insurance Business Act mandates that insurance rates must be based on objective and rational statistical data. Typically, creating a new program requires 2 to 3 months for risk analysis, rate review, policy adjustments, and system development. In this case, the program's features were presented before the rate calculations were completed. The industry fears that a lack of statistical evidence linking participation in the program to actual reductions in accident risk could lead to future disputes over rate adequacy. Additionally, the retroactive application from April 1 complicates verification of whether participants adhered to their non-driving commitments during that period.
For these reasons, insurers are requesting an official document from the financial authorities stating they will not impose penalties. If deemed a violation of the law, insurers could face fines of up to 50% of the annual premium income from the affected policies. They argue that verbal assurances are insufficient. However, the financial authorities have reiterated their position, asking the industry to trust their judgment.
An insurance industry representative stated, "While we understand the authorities believe there are no issues, the responsibility ultimately falls on the insurers if problems arise in the future. Given that political or policy shifts could lead to different interpretations of the same issue, at least some legal safeguards are necessary."
As a result of the ongoing tug-of-war between the industry and authorities, the launch of the 5-day discount program may be delayed. Some insurers are considering postponing the retroactive application from April 1 or pushing the launch to June after completing rate calculations.
* This article has been translated by AI.
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