The Era of 10 Million Vehicles Equipped with Black Boxes... The Hidden Intentions Behind Insurers Reducing Discounts

[Image source=Yonhap News]

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[Asia Economy Reporter Oh Hyung-gil] The decisive clue that revealed a customer’s wheel was deliberately damaged and replacement was recommended at a Tire Bank store was the 'black box.' The incident began when the customer confirmed from their black box footage that a tire store employee inserted a wrench into the wheel, forcefully bent it, and then recommended a replacement.

The number of vehicles subscribed to the 'black box special contract' has surpassed 10 million. A black box is a device that records driving footage, playing a role not only in traffic accidents but also in reporting illegal driving or parking and tracking hit-and-run offenders. However, as black boxes have become widespread, insurance companies have reduced or eliminated discounts that were previously offered simply for installing them, due to diminished effects on loss ratio improvement.

According to the Korea Insurance Development Institute on the 5th, the number of vehicles equipped with black boxes and subscribed to automobile insurance discount special contracts reached 10.78 million last year. This is a 13.4% increase from the previous year, surpassing 10 million for the first time. This accounts for 64.6% of all automobile insurance subscriptions (16.69 million vehicles), meaning that 6 out of 10 vehicles on the road are equipped with black boxes.

In particular, black box installation alone qualifies for automobile insurance discounts, making it one of the essential benefits for auto insurance subscribers. It is available as a special contract, and the subscription rate has been steadily increasing since surpassing 50% in 2017.

The popularization of black boxes is also welcomed by insurance companies. Black boxes play a decisive role in determining the fault ratio, which is the most sensitive factor in automobile insurance claims. Additionally, since driving habits are fully recorded, drivers are encouraged to drive safely themselves.

Capture of the black box video from a nearby taxi passenger car where Mr. A's crime was detected / Photo by Incheon Yeonsu Police Station (Yonhap News)

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However, as black boxes have become widespread, insurance companies are successively reducing black box discount benefits. Since many vehicles are already equipped and the effect on improving automobile insurance loss ratios has diminished compared to the past, they claim they can no longer maintain the discount benefits.

Samsung Fire & Marine Insurance excluded black box discounts for vehicles older than 12 years starting in April. DB Insurance also adjusted black box special contract discount rates by vehicle age in July. KB Insurance lowered the discount rate from 4.2% to 2.8% for vehicles under 12 years and 0.2% for those over 12 years.

Especially as automobile insurance loss ratios have recently risen again, there is increased pressure to manage loss ratios. The provisional automobile insurance loss ratios for September for Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance were between 85.5% and 87%. Some critics argue that insurance companies are reducing premium discount benefits to lower automobile insurance loss ratios.

An insurance company official said, "We decided to differentiate discounts because it was confirmed that older vehicles have higher accident rates even with black boxes installed," adding, "Since the black box discount is not large, its impact on improving automobile insurance loss ratios is not significant."

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