'April, the Month of Insurance Premium Increases'... Car Insurance and Whole Life Insurance Also Rising

[Asia Economy Reporter Oh Hyung-gil] From next month, premiums for whole life insurance policies at major life insurance companies are expected to rise. Non-life insurance companies are also considering premium increases in light of rising loss ratios.

According to the insurance industry on the 13th, Kyobo Life recently lowered the assumed interest rate for interest-linked whole life insurance from 2.25% to 2.00%, a decrease of 0.25 percentage points. Samsung Life is also planning to reduce the assumed interest rate for fixed interest whole life insurance from 2.25% to 2.00% starting in April.

It is also reported that Dongyang Life, Shinhan Life, NH Nonghyup Life, and DGB Life will lower their assumed interest rates by 0.25 percentage points.

The assumed interest rate is the expected rate of return applied by insurers when paying insurance benefits or refunds to financial consumers and serves as the basis for calculating premiums.

When the assumed interest rate is lowered, investment returns decrease, so insurers need to raise premiums. It is estimated that if an insurer lowers the assumed interest rate by 0.25 percentage points, premiums typically increase by about 5 to 10%.

Life insurers have been continuously lowering assumed interest rates in response to prolonged low interest rates. When the assumed interest rate decreases, the premiums that must be paid to receive the contracted insurance benefits increase.

Monthly Elapsed Loss Ratio of Auto Insurance (Source: Korea Insurance Research Institute)

Non-life insurers are reportedly planning premium increases due to rising loss ratios. They plan to raise premiums for indemnity medical insurance by about 8 to 20% in April.

Auto insurance premiums will also increase. MG Non-Life Insurance will raise personal auto insurance premiums by an average of 2% starting on the 16th. MG Non-Life recorded an auto insurance loss ratio of 107.7% last year, the highest among the 11 non-life insurers handling auto insurance.

Accordingly, attention is focused on whether the four major non-life insurers?Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, and KB Insurance?which account for 85% of the auto insurance market, will also raise premiums within the year.

However, the stabilization of loss ratios due to the impact of COVID-19 is considered a factor restraining premium increases. According to the Korea Insurance Research Institute, the spread of COVID-19 last year reduced the amount of driving, which in turn decreased the frequency of auto accidents, resulting in declines in liability insurance and bodily injury II and property damage loss amounts.

An industry official said, "Although loss ratios improved due to COVID-19 since last year, the situation is still in deficit," adding, "Premium increases may be considered depending on the trend of loss ratios."

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