Korea lowers insurance costs as factories go smart

Group purchasing already places rates 20% to 28% below standard market pricing.

South Korea's Korea Federation of Small and Medium Enterprises will offer a 5% premium discount on product liability (PL) insurance and mutual aid products to small and medium-sized manufacturers that have built smart factories, as reported the ChosunBiz.

The discount will apply to manufacturers that participated in the country's smart factory construction support programme. 

The federation said the measure aims to reduce insurance costs for companies that have invested in improving productivity and production efficiency.

The federation's PL insurance, developed jointly with the Ministry of SMEs and Startups in 1999, covers third-party liability for damages caused by product defects. 

Through a group purchasing model, premiums are already 20% to 28% lower than those of general insurers. Manufacturers with smart factories will receive an additional 5% discount.

The discount can also be combined with PL insurance premium support programmes operated by 13 local governments, including Seoul, Busan, Ulsan, Daegu and North Gyeongsang. 

Depending on the local government, 10% to 30% of the premium paid, up to 1 million won, is subsidised.

A 5% discount will also be available on mutual aid products covering fire, property damage and general liability. 

These products are 10% to 25% cheaper than comparable policies from general insurers and have fewer restrictions for high-risk industries that can be difficult to insure, including wood processing and plating.

Six major non-life insurers jointly provide claims handling and compensation services for the federation's PL insurance and mutual aid products.

Manufacturers must submit a certificate confirming their participation in the smart factory construction support programme when enrolling to receive the discount.