Korea Federation of SMEs offers extra 5% discount on product liability insurance for smart factory participants

The Korea Federation of SMEs said Tuesday it will offer an additional 5 percent discount on product liability insurance and mutual aid premiums for small and medium-sized manufacturers that have joined its smart factory support program.

Eligible companies must submit a certificate of participation in the smart factory support program when signing up for coverage. The initiative aims to lower the cost of protecting businesses against risks — including fire, product defects and production stoppages — that arise independently of the productivity gains that come with building a smart factory.

The federation's PL insurance covers a company's liability for bodily injury or property damage caused to third parties by defective products. The group policy was jointly developed by the federation and the Ministry of SMEs and Startups in 1999 and operates as a collective purchasing arrangement.

According to the federation, PL premiums under the group discount are already up to 20 to 28 percent cheaper than those offered by private insurers. Companies that have built smart factories can receive an additional 5 percent special discount on top of the existing group rate.

The discount can also be combined with PL insurance subsidy programs run by 13 local governments, including Seoul, Busan, Ulsan, Daegu, North Gyeongsang Province, Gwangju, South Jeolla Province, Incheon, Gangwon Province, North Chungcheong Province, North Jeolla Province, South Gyeongsang Province and Paju. Local government support covers 10 to 30 percent of premiums paid, up to a maximum of 1 million won ($664).

The 5 percent special discount also applies to mutual aid products covering property damage, including fire mutual aid, comprehensive business mutual aid and business liability mutual aid. Fire mutual aid covers fire risks at factories and general facilities, while comprehensive business mutual aid covers damage to assets and machinery as well as production stoppages. Business liability mutual aid compensates for bodily injury or property damage caused to third parties in the course of business operations.

Mutual aid premiums are 10 to 25 percent cheaper than those of private insurers, the federation said. It has also minimized enrollment restrictions for high-risk industries — such as wood processing and electroplating — that private insurers are reluctant to cover.

Six non-life insurance companies participate jointly in both the PL insurance and mutual aid programs, handling claims processing and compensation.

Yang Chan-hoe, executive managing director of the Korea Federation of SMEs, said the federation would support small and medium-sized manufacturers that have adopted smart factories so they can strengthen business stability against various risks and focus on manufacturing innovation.