South Korea’s auto insurance sector has been losing money for years. A regulation intended to address the primary cause – excessive treatment of minor injury claimants – has finally cleared the political obstacles that delayed it, and takes effect September 10.
The Financial Supervisory Service (FSS) announced on September 2, 2026, an amendment to standard auto insurance terms introducing mandatory medical reviews for minor injury patients seeking treatment beyond eight weeks following a traffic accident. The change also eliminates routine advance “settlement fund” payments to minor injury claimants. The rules have been months in the making, and contested at every step.
According to the Korea Insurance Development Institute, the number of minor injury patients – who primarily present with sprains or strains of joints and muscles – rose 5% from 1,520,115 in 2015 to 1,596,792 in 2024. Insurance payouts over the same period surged 88.9%, from 1.749 trillion won to 3.305 trillion won. The gap between patient growth and payout growth points directly to the overtreatment the FSS is targeting.
The sector’s overall financial position has deteriorated sharply. The combined auto insurance results of five non-life insurers – Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and Meritz Fire & Marine Insurance – swung to a loss of 10.5 billion won in the first half of 2026, from a profit of 126.1 billion won a year earlier, according to the Seoul Economic Daily.
Auto insurance underwriting posted a 708 billion won loss in 2025, with the loss ratio rising to 87.5% – well above the 80% level the industry considers break-even. The insurance industry estimates this year’s auto insurance cost increase at about 4%, and some forecasts put the 2026 underwriting loss at more than 1.2 trillion won.
Auto insurance is not the only line under strain. The Korea Times reported that by the third quarter of 2025, the cumulative risk loss ratio for indemnity health insurance had exceeded 100%, meaning insurers were paying out more in claims than they were collecting in risk premiums. The FSS is pursuing parallel reforms in that segment – a signal that intervention in claims behaviour across product lines has become a regulatory priority.
The delay in implementing the eight-week rule was driven largely by opposition from the Korean traditional medicine sector – and the industry data explains why. Among minor injury patients who received treatment for more than eight weeks last year at the four major non-life insurers, those treated by Korean medicine or combined Western-Korean medicine accounted for 90.3% of the total. Western medicine patients accounted for just 9.7%, according to the Seoul Economic Daily.
The cost gap was also significant. The average per-person treatment cost for Western medicine patients was 1.2 million won, compared to 3.4 million won for combined treatment – 2.8 times higher. One hospital alone treated 18,434 such patients in a single year, accounting for 13% of all long-term minor injury patients, at a per-person cost of 2.9 million won.
The Association of Korean Medicine pushed back when the FSS first announced the rules in January 2026. The association argued the measure effectively established an eight-week treatment ceiling “as a fait accompli” and called it “an act of trading the legitimate right of traffic accident victims to receive treatment for the interests of insurance companies and an act that goes beyond the law,” according to the Asia Business Daily.
The insurance industry disputed that framing. An industry official said the review committee – which also includes the Medical Association and the Association of Korean Medicine – was designed to add objectivity using data accumulated by insurers on minor injury cases, and that portraying insurers as sole decision-makers on long-term treatment approvals was “misleading.”
The rule was originally scheduled for April 1, 2026, but was postponed a fortnight before launch to incorporate exemptions for seniors, pregnant women, and children. The FSS then confirmed September 10 as the revised implementation date.
Under the FSS amendment, patients classified under injury grades 12 to 14 of the Automobile Damage Compensation Security Act – those with simple contusions or sprains – who seek treatment beyond eight weeks must submit a medical certificate, copies of medical records, and any imaging data to their insurer within seven weeks of the accident.
Insurers forward those documents to the Korea Automobile Damage Compensation Promotion Agency, where medical professionals assess whether continued treatment is warranted. Patients receive a decision within seven days. Those who disagree may appeal to the Ministry of Land, Infrastructure and Transport’s Compensation Dispute Mediation Committee within seven days of notification, with a ruling due within 14 days. The Korea Insurance Development Institute estimated the measure would lower auto insurance premiums by about 3%.
Future treatment costs – advance settlement payments made before treatment concludes – have also been overhauled. Previously paid routinely to minor injury patients without explicit justification, such payments are now limited to severe injury patients in grades 1 through 11, where medical evidence objectively supports the need. Minor injury patients will only be covered for actual treatment costs incurred. These revised payment criteria apply to contracts whose insurance period begins on or after October 25, 2026.
The informal practice of settling minor injury claims through advance “settlement funds” is now formally abolished for grades 12 to 14 claimants. That changes both the settlement timeline and the negotiation dynamic for third-party motor liability claims. Brokers handling fleet or commercial motor accounts should factor in longer claim resolution periods while the medical review process beds in.
Premium pressure is not easing. After four straight years of rate cuts, auto insurance premiums rose for the first time in five years in early 2026 – by just 1.3% to 1.4%. Because increases are reflected in stages as policies renew, their effect has been limited. If the eight-week rule does not materially reduce claim frequency and cost, further rate increases are likely heading into 2027.
The Association of Korean Medicine’s objections have not fully resolved. The review framework could yet face pressure through courts or legislative channels. Brokers advising clients with South Korean motor exposures should track that risk – and factor the uncertainty into renewal advice.
