Record Heavy Rain Causes 16 Billion KRW Vehicle Flood Damage... Auto Insurance Loss Ratio 'Negative Factor' (Comprehensive)

1585 Vehicle Flood Damage Cases at 4 Non-Life Insurers
Own Car Coverage Compensation... Loss Amount Expected to Increase

On the 18th, during the summer vehicle flooding response drill held at Tancheon Juchang in Songpa-gu, Seoul, a tow truck is towing a parked vehicle. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Oh Hyung-gil] Record-breaking heavy rain exceeding 80mm per hour poured down in Busan, causing significant damage nationwide due to concentrated heavy rainfall. The insurance industry is also expressing concerns that the loss ratio of automobile insurance will inevitably worsen as the number of vehicles flooded by suddenly rising water increases.

According to the General Insurance Association on the 28th, from the 9th to 9 a.m. on the 27th, the number of vehicle damage claims reported to four companies?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance?due to concentrated heavy rain reached 1,620 cases. Among these, vehicle flooding accounted for 1,585 cases, with an estimated damage amount of 16.12 billion KRW, representing the majority of vehicle damage.

By region, 1,478 cases of vehicle flooding occurred in Busan and Gyeongsang Province, with damage amounting to 15.339 billion KRW, the highest damage nationwide.

Seoul, Incheon, and Gyeonggi followed with 44 cases of vehicle flooding and damage amounting to 312 million KRW. Gwangju and Jeolla recorded 27 cases, while Daejeon, Chungcheong, Gangneung, and Gangwon each recorded 18 cases.

Status of Vehicle Damage Reports Due to Heavy Rainfall in July

Under the current automobile insurance, compensation for flooded vehicles is provided through the own-damage coverage (comprehensive coverage). Drivers can confirm flood damage and claim insurance benefits from the insurance company they subscribed to.

Compensation is possible whether water enters the vehicle while passing through a flooded area or if the vehicle is flooded while parked due to typhoons or floods. Regardless of illegal parking, flooding during parking caused by natural disasters is treated as a no-fault accident under own-damage coverage and is excluded from premium surcharges. However, if the vehicle is driven into an already flooded area and becomes flooded, surcharges may apply depending on the driver's fault and the amount of damage, so caution is advised.

However, compensation is not provided if rainwater enters through open car windows or sunroofs. Items left inside the vehicle are also not covered.

Additionally, if a vehicle is completely damaged by flooding and a new vehicle is purchased, acquisition and registration taxes can be reduced. A certificate of total loss issued by the General Insurance Association can be obtained from the insurance company and attached when registering the vehicle at the vehicle registration office. This applies when the damaged vehicle is scrapped and a new vehicle is acquired or when the insurance company takes possession of the damaged vehicle according to the total loss certificate.

An insurance company official explained, "If the car stops or is parked in water, do not start the engine or touch other devices; it should be towed." He added, "Starting the engine when water has entered inside can cause water to enter surrounding engine parts, leading to friction and severe engine damage."

Factors Worsening Automobile Insurance Loss Ratio in July

The general insurance industry expects the automobile insurance loss ratio, which had been stable this year, to rise again due to this flood damage. In July 2011, flood damage amounting to about 40 billion KRW caused the automobile insurance loss ratio to increase by about 4 percentage points that month.

In June, the average automobile insurance loss ratio of domestic general insurers was 91.3% (preliminary closing), a sharp increase of 4.6 percentage points from the previous month. This was the largest increase this year, rising into the 90% range for the first time in five months. It significantly exceeded the 78-80% range that insurers typically manage as an appropriate loss ratio.

The automobile insurance loss ratio, which reached 93.2% in January, dropped to 89.2% within a month due to premium increases. In March, when COVID-19 began to spread in earnest, it fell to 84.4%. However, as confirmed cases decreased and quarantine guidelines shifted to "distancing in daily life" in April and May, the loss ratio rose again to 88.6% and 87.9%, respectively.

Monthly Average Loss Ratio of Auto Insurance by Non-Life Insurance Companies

This content was produced with the assistance of AI translation services.