Threshold of full insurance coverage for delivery people is high as full insurance coverage costs $8,630 (10 million KRW). This means that they have to pay about $25.88 (30,000 KRW) daily for insurance. There were 2.166 million motorcycles registered by Ministry of Land, Infrastructure, and Transport (MOLIT) in 2017. Out of these motorcycles, only 5% (123,000) of them were covered by full insurance coverage. Industries estimate that there were not even 50,000 motorcycles covered by full insurance coverage when it comes to motorcycles for delivery purpose.
Full insurance coverage has huge impact. If there is an accident involving a person, a delivery person has to pay out of his or her pocket to come up with settlement money if he or she does not have a full insurance coverage. Without settlement money, corresponding accident can lead to a civil action. Delivery people also have to pay for their attorneys. Full insurance coverage can lessen such burdens as insurance companies negotiate with victims and come up with settlement money.
Some point out that high insurance fee causes a controversy where rich people get away while poor people are guilty with accidents that they are involved in. Experts suggest that insurance companies cannot be responsible for calculating insurance cost. South Korean Government and delivery industry need to find an alternative where more delivery people are covered by full insurance.
◊High cost of full insurance leading delivery people to liability insurance
When insurance cost was calculated using a South Korean insurance company’s website, insurance cost came out to be $3,970 (4.6 million KRW) after entering age, motorcycle brand, engine displacement, and purpose of use. Insurance cost came out relatively inexpensive when age was more than 30 years old and there was zero accident history. However, insurance cost goes up as age goes down. When low age was entered while keeping other conditions same, insurance cost came out to be almost $8,630 (10 million KRW).
Calculation method based on statistics for percentage of accident risks is behind high insurance cost. Insurance adjustment process of a motorcycle is also relatively shower than that of a normal truck. This is because market for motorcycles for delivery purpose is relatively small. Motorcycles for delivery purpose have high risks of an accident compared to regular motorcycles. Difference in insurance costs can be almost twenty times apart. Level of risk is decided based on actuarial procedure after going through formal rate verification agencies such as Korea Insurance Development Institute (KIDI). KIDI presents basic insurance cost that can be utilized by regular insurance companies.
There is always a gap even when a delivery person is covered by full insurance coverage. Insurance companies are almost fully responsible for damage done on the other person. However, it does not guarantee damage done on a delivery person or his or her motorcycle. If he or she slips due to wet road, he or she has to be responsible for resulting damage. This is a reason why delivery people join separate accident insurance by paying additional cost.
However, joining accident insurance is not easy as well as insurance companies are hesitant on undertaking insurance. “Every insurance company is pessimistic on undertaking insurance of a motorcycle for delivery purpose.” said Vice-President Kim Ok-kyoon of Bomapp. “They try not to undertake insurance by setting insurance premium high.”
As a result, it is realistically difficult for delivery people to join full insurance coverage on their own. They either rent motorcycles that are covered by full insurance coverage or depend on liability insurance.
Liability insurance is only a basic safety measure. Not only does it not guarantee one’s damage or vehicle, it also only pays minimum amount for the other person. Limits for accidents involving a person or a material are $129,000 (150 million KRW) and $17,300 (20 million KRW) respectively. Based on diagnosis made by a hospital, it pays amount that is already pre-set. Settlement with the other person has to be done by the corresponding delivery person. There is almost zero chance that an accident is resolved with just hospital cost as there needs to be settlement money for not being able to work due to treatment. Sometimes, the other person asks compensation for aftereffect. If there is any issue with settlement, accident will lead to a civil action requiring corresponding delivery person to hire an attorney on his or her own.

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◊Battles between delivery people, delivery agency businesses, motorcycle rental businesses, and restaurants
The gap between the rich and the poor delivery people is very severe. Most of delivery people are not in a situation where they are concerned about full insurance coverage. This is a reason why many delivery people rent motorcycles as they come with full insurance coverage.
Rent cost depends on fluctuation of insurance rate. Full insurance coverage that motorcycle rental companies join is different from the one that are joined by regular people as insurance rate fluctuates irregularly. This is a huge burden for delivery people who only make about $3.02 (3,500 KRW) per delivery.
Motorcycle rental companies are also in a difficult situation as they pay first and settle afterwards. Not only do they have to purchase motorcycles, but they are also responsible for insurance cost, registration fee, and delivery container. They are only able to operate normally when they collect money from delivery agency businesses and delivery people. If a delivery agency business closes its business suddenly, corresponding motorcycle rental companies are also hit a major blow.
There are constant side-effects stemming from high insurance rate. It is heard that there are few delivery people who join insurance that covers motorcycles for before-work and after-work purposes. Most of these people work as delivery people as a side job. When there is an accident, they can be a victim of insurance fraud resulting in criminal penalty. However, delivery people continue to try to find ways to avoid high insurance rate.
Some delivery people are preferring to be free-lancer delivery people. Because these people work with their own motorcycles, delivery agency businesses have less financial burden from insurance rate. If a delivery person is involved in an accident while riding a company’s motorcycle, corresponding delivery person and delivery agency business are equally responsible for corresponding accident. It is estimated that 40% of all delivery people are free-lancer people. However, such trend can bring bigger disaster. Whether to have a delivery person entirely responsible for an accident is the key issue. Acknowledging a free-lancer delivery person as a wage earner or not can lead to a legal battle.
There are even ‘battles between businesses with less power’ due to economic depression. Restaurants based on delivery food that are facing financial difficulties focus on improving their profits rather than coexisting with each other. When they hire delivery people, they see that personnel expense is reduced by more than half and that they are rather free from insurance rate. However, they are rather stingy when it comes to increasing delivery fee that is source of income for delivery people. “We are exposed various accidents when we are on the road and sometimes we hear of accidents that lead to death.” said one delivery person who requested an anonymity. “Although we are joining full insurance coverage to avoid stress from these accidents, there is too much financial burden for us.”
◊South Korean Government must work with delivery agency businesses to come up with solutions
There are requests for improvement within insurance market. Bomapp sees that insurance market for motorcycles will not improve at all if insurance companies are responsible for setting insurance rates. It is realistically difficult to induce insurance companies to expand their full insurance coverage on their own. Bomapp is a startup company that opened ‘Insurtech’ market by combining insurance and IT.
According to Bomapp, insurance companies have had perception that there are huge risks to delivery market. As a result, they have been negligent on finding ways to reduce risks. Ultimately, South Korean Government and delivery agency businesses need to come together to prepare solutions.
Bomapp suggested three alternatives. It suggested that delivery agency businesses need to form joint allotment and reduce insurance rates by negotiating with insurance companies based on purchasing power that they secure. It also suggested that there is a need to evaluate risks differently based on age and it added that insurance rate needs to be based on actual mileages of motorcycles that are tracked.
It also suggested that there needs to be a solution to distribute risks. It requested that data on driving behavior needs to be collected to secure social safety network and that development of safety devices needs to be vitalized. Finally, it emphasized that South Korean Government needs to increase full insurance coverage through policies that provide discounts on insurance rates for low-income families.
Industries also agree with Bomapp’s suggestions. Insurance on motorcycles is currently designed based on data of quick service businesses. They applied loss ratio of quick service businesses that are based on medium to long distance to delivery agency businesses that are based on short distance. “Insurance companies hesitant on undertaking insurance due to the fact that there is no logical data that can be used to calculate accident rate.” said a representative for Barogo. “We need to put in effort so that insurance rates are accurately calculated based on scientific data.”
Staff Reporter Choi, Jonghee | choijh@etnews.com