Improvement in Auto Insurance Loss Ratio This Year... Temporary Effect Due to Corona

Korea Insurance Research Institute Report 'Changes and Implications of Auto Insurance Loss Ratio in 2020'

[Asia Economy Reporter Ki Ha-young] The decrease in the automobile insurance loss ratio this year is analyzed to be a temporary phenomenon caused by the novel coronavirus disease (COVID-19). Accordingly, it is pointed out that discussions on improving the personal injury compensation system to reduce insurance payout leakage should continue.

According to the report "Changes and Implications of the 2020 Automobile Insurance Loss Ratio" recently released by the Korea Insurance Research Institute on the 28th, the automobile insurance loss ratio has remained in the 85% range until August. The automobile insurance loss ratio, which soared to 105.9% last December, dropped to 79.2% in March when COVID-19 began to spread in earnest.

This is due to the reduction in automobile operation caused by the spread of COVID-19. As the amount of automobile operation decreased, the frequency of automobile accidents also decreased proportionally. According to the Korea Expressway Corporation, the nationwide monthly traffic volume decreased by about 10% compared to the previous year in February and March.

Since August, as social distancing measures were strengthened due to the resurgence of COVID-19, the increase in incurred losses has also slowed. In particular, a significant decrease in incurred losses from Personal Injury Compensation II, the main culprit of loss ratio deterioration, was observed. For Personal Injury Compensation II, which covers personal injury compensation exceeding compulsory insurance, the decrease in accident frequency due to reduced automobile operation and the reduction in excessive medical treatment by so-called "nai-ron patients" appeared simultaneously, resulting in a relatively large decrease in incurred losses.

However, the Korea Insurance Research Institute pointed out that although the automobile insurance loss ratio is lower than usual due to the impact of COVID-19, it still remains higher than the expected loss ratio. The expected loss ratio applied when calculating automobile insurance premiums is around 78%, and since the automobile insurance loss ratio is higher than this, losses continue.

Furthermore, it was analyzed that there is uncertainty as to whether the improvement in the loss ratio will continue depending on the spread of COVID-19.

Kim Se-jung, a research fellow at the Korea Insurance Research Institute, said, "The improvement in the automobile insurance loss ratio is a temporary phenomenon caused by COVID-19," and added, "Long-term institutional improvement discussions, such as promoting the use of alternative parts (certified products) to reduce insurance payout leakage and improving the personal injury compensation system, need to continue."

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