4 Major Insurers, Auto Insurance Loss Ratio Down 80%'↓'...Industry "Concerns Over Increase in Second Half"

Concerns Over Rising Loss Ratios Following June Vaccinations

[Asia Economy Reporter Ki Ha-young] As the prolonged COVID-19 pandemic has reduced the number of vehicles on the road, the loss ratio of automobile insurance is also decreasing. While some expect a surplus, considering the increase in outing vehicles due to the vaccination effect from June and seasonal factors such as the rainy season and typhoons, it is still too early to discuss the stabilization of the loss ratio.

According to the non-life insurance industry on the 8th, the automobile insurance loss ratio of major insurers such as Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance was tentatively estimated at 79.1% to 79.8% until last month.

The automobile insurance loss ratio (combined loss ratio) refers to the ratio of insurance claim payments to total premium income. Considering operating expenses, the 80% level is known to be the breakeven point. All four companies, which account for 85% market share, recorded a loss ratio in the 79% range over five months, leading to speculation that they are currently in surplus.

Last month’s automobile insurance loss ratio also decreased compared to both the previous year and the previous month. Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, and DB Insurance all recorded a loss ratio of 77.0% last month, down 4.2 to 4.3 percentage points from the previous year. Compared to the previous month, it decreased by 2 to 2.2 percentage points. KB Insurance recorded a loss ratio of 76.0% last month, improving by 4.4 percentage points year-on-year and 7 percentage points month-on-month.

Typically, the loss ratio rises after May as outing vehicles increase, but this year the loss ratio decreased compared to April. Due to the resurgence of COVID-19 and the sustained number of confirmed cases, people have refrained from outdoor activities, resulting in reduced vehicle operation.

Some suggest that if this loss ratio trend continues, automobile insurance could achieve a surplus for the first time since 2017. According to supervisory authority statistics, automobile insurance operating profit recorded a brief surplus of 26.6 billion KRW in 2017 but posted a deficit of 723.7 billion KRW in 2018, which increased to 1.6445 trillion KRW in 2019. Last year, when premiums were raised, the deficit decreased to 379.9 billion KRW.

However, the insurance industry points out that it is premature to discuss loss ratio stabilization. An industry official said, "If the vaccination rate increases after June, outdoor activities will surge, accidents will increase again, and the loss ratio may rise again," adding, "There is also concern that losses will increase due to seasonal factors such as the rainy season and typhoons." Considering future cost increases such as maintenance fee hikes and increased oriental medical treatment expenses, operating performance is expected to deteriorate again.

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