When Lee, 40, rear-ended a Hyundai Motor Genesis in front of him this February, he was shocked by the repair bill. The auto repair shop replaced the entire bumper that had only scratches, swapped out lamps that were not damaged at all, and even repaired the trunk, which was unrelated to the accident. The total repair bill came to 800,000 won, but at least 480,000 won was suspected of being excessive repairs.
Excessive repair practices by auto repair shops are still not being eradicated. Industry insiders say insurance payouts for unnecessary repairs are driving up the auto insurance loss ratio.
According to the financial industry on Tuesday, the total amount that domestic non-life insurers paid out last year for repair costs, including labor and painting, and parts costs, is estimated at 8 trillion won. The figure was calculated by extrapolating to the entire industry the repair and parts costs (7.1975 trillion won) paid by the four major non-life insurers — Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance — which account for 80% of the market share.
Parts costs paid by the four major non-life insurers last year reached 3.747 trillion won, surging 42.9% from 2020. As in Lee's case, problems frequently arose where new parts were used to replace components even when minor damage could have been restored through methods such as panel beating and painting.
Spending by the four major non-life insurers on repair costs such as labor and painting also rose 22.7%, from 2.8114 trillion won in 2020 to 3.4505 trillion won in 2025. Considering that the number of repair cases during the same period increased only 1.6%, from 4.87 million to 4.95 million, repair costs per case rose more than 20%.
Auto repair shops are able to engage in excessive replacements because they do not comply with the minor damage repair standards stipulated in auto insurance policy terms. According to the terms, only restoration repair costs are recognized for damage that can be restored without parts replacement. However, repair shops recommend replacement instead of restoration on the grounds that, since they are not the vehicle owners, they have no obligation to comply. In fact, the annual replacement counts for front and rear bumpers reached 1.46 million and 830,000 cases, respectively, far exceeding the repair counts of 250,000 and 240,000 cases. "Looking only at repair cost per case, restoration is more expensive, but considering turnover, replacement is far more profitable," an insurance industry official said.
Excessive replacement repairs are often recommended particularly for victim vehicles in simple rear-end collisions, since repair costs can be claimed from the other party's insurer and there is no deductible. Most repair shops do not provide the estimates that, under the Automobile Management Act, must be issued to vehicle owners in advance. Among auto repair shops, quite a few simply carry out repairs and bill the costs without even submitting photographic evidence of whether there was damage to the parts requiring repair.
The problem is that, except for consumables such as bumpers, panel replacement repairs damage vehicle value and are disadvantageous to owners. Replacement repairs are normally chosen only when restoration to the original condition is impossible, and they are taken as evidence that the extent of damage was much greater than in restoration repairs. Replacement repairs for parts other than bumpers carry a large depreciation impact and should be chosen carefully, but repair shops do not disclose this. Since insurance repair histories can be checked through the Korea Insurance Development Institute's Carhistory and the Ministry of Land, Infrastructure and Transport's Car365, there is no way to avoid such disadvantages.
As insurance leakage continues, the cumulative auto insurance loss ratio rose to 85.8% from January to April this year, up 2.5 percentage points from the same period last year. Auto insurance premiums were raised this year for the first time in five years, but the impact of four consecutive years of cuts from 2022 to 2025 is still being felt.
Voices in the insurance industry say it is necessary to consider strengthening binding force through measures such as legislation so that repair shops comply with insurance policy terms. "If unnecessary replacement repairs are carried out, vehicles inevitably take a heavy accident-related depreciation hit when sold as used cars," an insurance industry official stressed. "When repair shops recommend a repair method, they should also be required to explain the impact on vehicle value."
