Next Month's Moderate Premium Increase... From Indemnity and Car Insurance to Whole Life Insurance

Life Insurance Companies Plan to Cut Scheduled Interest Rate by 0.25 Percentage Points
Maximum Increase Rate for Actual Loss Insurance at 19.6%

[Asia Economy Reporter Ki Ha-young] Insurance premiums will be raised one after another starting next month. Major life insurance companies have lowered the guaranteed interest rate for protection insurance as planned, and small and medium-sized non-life insurance companies are raising automobile insurance premiums one after another. In addition, with major insurers confirming double-digit increases in actual medical expense insurance (actual expense insurance) rates this year, consumers' insurance premium burdens are expected to increase significantly.

According to the insurance industry on the 17th, major life insurers are lowering the guaranteed interest rate by 0.25 percentage points this month and next month, causing insurance premiums to rise by about 10%.

The guaranteed interest rate refers to the interest rate applied to insurance premiums to pay the promised insurance benefits to long-term policyholders. When the guaranteed interest rate rises, the same insurance benefits can be received with lower premiums, but when it falls, the premium burden increases. It is known that when the guaranteed interest rate drops by 0.25%, insurance premiums for new or renewed contracts generally increase by 7-13%.

Samsung Life Insurance and Kyobo Life Insurance will lower the guaranteed interest rate from 2.25% to 2.0% between March and May. Previously, Samsung Life and Kyobo Life lowered the guaranteed interest rate from 2.5% to 2.25% in April last year, and again lowered it to 2.0% for one and two products respectively between October and February. Samsung Life plans to adjust the guaranteed interest rate to 2.0% for the remaining products that were not lowered at the end of last year during April and May. Kyobo Life also lowered the guaranteed interest rate to 2.0% for the remaining products this month.

Small and medium-sized life insurers are also joining the reduction trend. NH Nonghyup Life Insurance will adjust the guaranteed interest rate for protection insurance from 2.25% to 2.0% next month. Whole life insurance was lowered last year and already applies 2.0%. Tongyang Life Insurance lowered the guaranteed interest rate to 2.25% for non-renewable protection products in January, and will similarly lower the rate for renewable protection products and whole life insurance next month.

The reason life insurers are lowering the guaranteed interest rate one after another is due to the prolonged low interest rate environment. Insurers invest assets in bonds and other instruments to increase investment returns, but with the Bank of Korea holding the base rate at 0.5% last month, the risk of negative interest margin is increasing.

Automobile insurance premiums are also rising. MG Non-Life Insurance raised personal automobile insurance premiums by an average of 2% starting yesterday. This decision was made to manage the deteriorated loss ratio. MG Non-Life's loss ratio last year was 107.7%, the highest among the 11 non-life insurers handling automobile insurance. The loss ratio is the ratio of insurance claims paid to customers compared to premiums received from policyholders, and the industry considers the appropriate loss ratio for automobile insurance to be around 78-80%. Lotte and Carrot Non-Life Insurance have recently requested rate verification from the Korea Insurance Development Institute, and AXA Non-Life Insurance is reviewing premium increases for commercial vehicles.

Earlier, major insurers confirmed an increase rate of up to 19.6% for actual expense insurance this year. The '1st generation' old actual expense insurance sold until September 2009 increased by an average of 17.5-19.6% across companies, and the standardized actual expense insurance sold until March 2017 increased by an average of 11.9-13.9%. This year's actual expense insurance premium increase rate is the highest in the past five years. Policyholders of 1st and 2nd generation actual expense insurance, which are renewed every 3-5 years, have seen cumulative increases, causing premiums to rise by nearly 50-200% depending on age or health condition.

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