The parking lot of an apartment complex in Seoul's Songpa District is filled with cars, April 8, the day the government's odd-even vehicle rotation system took effect for public sector employees to ease energy supply strains triggered by the U.S.-Iran conflict. Yonhap

Korean insurers are voicing concerns over the effectiveness of a government proposal to offer premium discounts to drivers who comply with a vehicle rotation scheme that aims to ease the current energy supply strain, according to industry officials Monday.

The officials said the plan is prone to false reporting and may overlap with existing policy discounts, effectively shifting the cost of a public measure onto private insurance companies, and ultimately, onto consumers.

Amid the U.S.-Iran conflict, which has heightened concerns over oil supply, public sector vehicles have been subject to an odd-even rotation system since April 8, restricting use every other business day based on license plate numbers.

For private vehicles, a five-day rotation that bars cars from operating on one designated weekday, remains voluntary.

The government is in talks with insurers to introduce temporary policy discounts to drivers who observe the scheme. Details, including the duration and discount rate, are expected to be announced later this week.

A key concern, insiders say, is the lack of a reliable way to verify compliance. With no credible mechanism to track actual vehicle use, the proposal makes it difficult to prevent false claims.

“Without a state-led verification system, there is no practical way for insurers to check compliance on an individual basis,” an industry official said. “So in reality, that raises the likelihood of this turning into a de facto blanket discount for all drivers.”

Because auto insurance is mandatory and covers a broad base of drivers, even a 1 to 2 percent cut in premiums can translate into substantial losses for insurers.

“From an individual driver’s perspective, the discount might only amount to several thousand to tens of thousands of won a year, so the benefit may feel marginal,” the official added. “But for insurers, applying even a small reduction across such a large pool of policyholders creates a considerable burden.”

Source: Korea Times News