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By Choi Woo-ri, staff reporter

More than one trillion won (US$939 million) in insurance was paid out for foreign-made cars last year, government data show.

Ministry of Land, Infrastructure and Transport and Korea Insurance Development Institute data received by Saenuri Party lawmaker Kim Hee-kuk on Oct. 14 showed foreign cars accounting for just 939,000 out of 19.4 million registered automobiles in South Korea last year, or 4.7%, but 20.2% of all insurance payouts.

Part of the difference was due to repair and rental costs, which can run several times higher than for domestic cars. But another factor was owner fraud.

One example is a 43-year-old doctor surnamed Lee who operates a clinic in Seoul’s Gangnam district. One early morning in July, Lee got into an accident in which he drove his Mercedes into a curb after drinking with colleagues. Responding to a report from a passing taxi driver, police conducted a breathalyzer test and found Lee’s blood alcohol content to be 0.13%. Lee, who lost his license over the accident, falsely reported it to his insurance company as a “simple traffic accident” and requested 45 million won (US$42,300) for repairs.

Another driver, a 36-year-old surnamed Han, hit a paving block while driving his Mercedes in Seoul’s Yongsan district. One front tire sprung a leak, and the axle suffered scraping damage. Knowing his automobile insurance had expired just the day before, Han told the company the accident had happened a week earlier and collected 6.5 million won (US$6,100) for repairs.

For another driver, a 53-year-old named Kang who runs a major restaurant in Seoul’s Songpa district, the incident last July involved a customer‘s Porsche that suffered scraping on the garage wall while being parked by a valet. Insurance payouts are not given for valet parking accidents. Kang attempted to collect 4 million won (US$3,800) after filing a false accident report claiming he had hit the Porsche while driving his own BMW.

“The insurance company asked us to investigate, so we went to the garage ourselves and saw that Mr. Kang parked in the innermost spot,” said Kim Do-gyun, a lieutenant at the Songpa Police Station.

“The accident seemed suspicious because there didn’t seem to be any reason for him to move his car, so we questioned him about it, and he finally confessed,” Kim explained.

The station announced on Oct. 14 that it had indicted seven people without detention, including Lee, for insurance fraud cases involving foreign cars.

The data provided to Kim Hee-kuk showed the number of foreign cars in South Korea rising from 760,000 in 2009 to 939,000 in 2013, an increase of roughly 180,000 vehicles. Insurance payouts over the same period rose by 2.2 times from 477.4 billion won (US$448.5 million) to 1,067.3 billion won (US$1.0 billion).

The average repair cost for foreign cars was 2,761,000 won (US$2,590), or about three times the 949,000 won (US$890) average for domestic models. Rental costs averaged 1.3 million won (US$1,220) for foreign cars, versus 394,000 won (US$370) for domestic cars. In some 35,000 cases of accidents involving foreign cars, rental costs were higher than repair costs.

“Parts for foreign cars costs several times what they do for domestic cars,” said Kim. “We need to come up ideas for lowering the cost.”

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