FSS to guide young drivers on auto insurance discounts

Military service, long-term rental driving count toward up to 3 years of credit

Pop-up notices to appear on online enrollment channels this month

[Getty Images Bank]
[Getty Images Bank]

Young drivers taking out their first auto insurance policy can significantly lower their premiums by claiming credit for time spent driving under a parent's policy as a secondary insured, or for service as a military driver. Financial regulators said they will overhaul the auto insurance enrollment process this month to make sure young people do not miss out on these discounts.

The Financial Supervisory Service announced Tuesday that it is working with the General Insurance Association of Korea and the Insurance Development Institute to inform drivers between the ages of 19 and 34 about available auto insurance premium discounts and to streamline the enrollment process.

Auto insurance premiums are calculated based on a policyholder's risk level, including driving history and accident record. Insurers assign one of 29 discount-surcharge ratings — ranging from 1Z to 29P — based on past accident history, with first-time policyholders starting at the 11Z rating. Driving history of up to three years is also factored into premiums. Under the reference net insurance rate, drivers with less than one year of coverage history pay a rate of 100.0 percent; those with one year pay 79.7 percent; two years, 72.7 percent; and three or more years, 71.1 percent.

Keeping track of available discounts has become more important since major non-life insurers raised auto insurance premiums by 1.3 to 1.4 percent starting in February this year — the first increase in five years since 2021 — citing a deterioration in loss ratios.

The challenge for many young drivers is that they have often driven under a parent's name, as a military driver, or in a long-term rental vehicle — none of which automatically counts toward their own insurance history. Without that credit, they face comparatively high premiums when they first take out a policy. The FSS said some young drivers had filed complaints after missing out on benefits they did not know existed.

Under the secondary insured driving and accident-free record recognition program, a child registered as a secondary insured on a parent's policy can receive up to three years of driving history credit when taking out a first policy. If all insured parties on the parent's policy have a clean accident record, the accident-free credit applies as well. For example, a 28-year-old driver who spent three years as a secondary insured under a family-restricted rider on a parent's policy — with no accidents — and then buys an Avante valued at 20 million won ($15,000) under a single named-driver policy would see premiums fall from 1.33 million won to 716,582 won, a reduction of 46.1 percent, or about 610,000 won.

If a parent registers a child as a secondary insured and simultaneously enrolls the child as a history-recognition candidate at the time of policy purchase, the driving credit can be applied without any additional documentation. Up to two people per policy can be registered this way. However, if there has been an accident within the past three years, the accident-free credit will not apply.

Even drivers who have never held a policy in their own name can claim credit through the insurance history recognition program for time spent as a military driver or driving a long-term rental vehicle. Driving for government agencies or corporations, as well as overseas auto insurance coverage, also qualifies. A 28-year-old driver with one year and six months of military driving experience and one year and six months of long-term rental driving would receive three years of insurance history credit, bringing premiums down to 946,300 won — a 28.9 percent reduction of about 380,000 won.

Credit is recognized in one-year increments, and periods of less than one year from different qualifying categories can be combined — though overlapping periods count only once. Drivers who miss the application window at enrollment or renewal can still apply during or after the policy period and receive a retroactive premium refund.

For young drivers with no driving history at all, optional riders offer another route to lower premiums. A 28-year-old who adds a single named-driver and age-restricted rider would see premiums drop from 2.47 million won to 1.33 million won — a 46.2 percent reduction of about 1.14 million won. Other available discount riders include mileage-based, public transit use and step-count, advanced safety device, dashcam, and usage-based insurance discounts. These riders are not applied automatically and must be selected individually; if someone outside the scope of a restricted rider drives the vehicle and causes an accident, coverage may not apply.

The FSS said it will add pop-up notices to online enrollment channels — widely used by younger drivers — this month to highlight the history recognition program and available discount riders, and will introduce a dedicated rider-selection screen where young drivers can view all applicable discounts at a glance. For in-person and telemarketing channels, the FSS will revise agent guidance screens and the standard product explanation script to ensure the information is not omitted.

"Actual premiums may vary by insurer," an FSS official said. "Policyholders should always check the terms and conditions of the insurer they plan to use for details such as rider product names, discount conditions and rates."


won@heraldcorp.com