About
When the products are delivered to public institutions after performance approval(among the products of midsized companies), this insurance secures and covers responsibility to pay off damage occurred due to defective performance of the product. Decline in performance : durability, expected security and accessibility falls short by the standards
Entitled Parties
Normal associates, approved association members (including participating members)
Background
Introduced as a supplementary system after the abolishment of the previous group contract policy, to eliminate market failure factors resulting from a lack of awareness regarding products from mid-sized companies.
Application
- For prior purchase contracts as midsized companies, they must present proof that they are under coverage of performance insurance
- Customers should be free from concern when purchasing technology development products with exemption measures
- Establishment of policies and regulations to be executed by contract law, for investing institutions to directly purchase new technology products, promoting purchase of mid-size companies' products.
Legal Basis
Basis of performance insurance: Article 18, Paragraph 1 of the Act on Promotion of Purchase of Products and Support for Small and Medium Enterprises
- Article 18 (Execution of performance insurance business) ① Any person who falls under any of the following subparagraphs shall run a business (hereafter referred to as "performance guarantee business) for the purpose of guaranteeing the damage which public institutions suffer caused by purchasing products according to Article 14 (1).
- 1. These who are operating insurance business pursuant to Article 2 (1) of the 「Insurance Business Act」
- 2. Korean Trade Insurance Corporation in accordance with Article 37 of the 「Trade Insurance Act」
- 3. Any person who is eligible to run insurance business pursuant to other laws and regulations
Basis of preferential purchase: Article 14 (1) of the Act, and Article 13 (1) of the Enforcement Decree of the same Act
- Article 14 (Designation of technology development products subject to preferential purchase, etc) ① The President of Small and Medium Business Administration (hereinafter referred to as "technology development products subject to preferential purchase") shall designate the qualified products decided by a Presidential decree which received performance authentication and notify them.
Enforcement ordinance Article 13 (designation of technology development products subject to preferential purchase), Article 14 (1) of the Act, "Products with certain qualifications prescribed by the Presidential Decree, such as products that have been certified for performance authentication" refer to the following products.- 1. Products which received performance authentication according to Article 15 (1) of the Act
Disclaimer: Article 14 (3) of the same Act
- 14 (Designation of technology development products subject to preferential purchase) ③ The person in charge of purchase in public institutions who are supposed to purchase technology development products subject to preferential purchase shall not be liable for the damages or losses caused by purchasing corresponding products unless any mistake or substantial negligence is proven.
Scope of Coverage
- Amount to be paid to the consumer due to product defect, lesser amount among the two cases listed below
- Fixation cost including fixing, removal, and renovation cost
- Cost for product substitution (sale price subtracted by listed profit)
Covered products
Performance-certified products of small and medium-sized enterprises
Limitation of Coverage
Must be lesser than contract fee (100%)
Coverage rate
Under 0.5%
Benefits of registering through mutual aid association
Mutual aid association pursues the common economic benefit of the industry
- Efficient risk management by common industry alliance
- Establishment of strong response tactics when defect occurs
Risk Evaluation by a professional organization
- When data is accumulated for all industry and product lines, self-evaluation of risk is capable
Profit distribution to members
- A non-profit organization that returns all management profit to its members
Small Medium Business Administration
- SMEs
- Certification Agency
- Machinery Financial Cooperative