"Heavy Rain Passes, Monsoon Begins"… Insurance Companies Enter Ultra-Alert Mode (Comprehensive)

Tension Mode on Factors Increasing Auto Insurance Loss Ratio
Last Year's Rainy Season Damage Exceeds 100 Billion Won

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] Insurance companies are on edge ahead of the upcoming monsoon season starting this weekend. This is due to the recent frequent occurrence of unusual sudden heavy rains and forecasts that this year's monsoon season will bring more rainfall than usual. Insurers are concerned that last year's record-breaking damages might be repeated.

According to the Korea Meteorological Administration and the insurance industry on the 1st, this year's monsoon is expected to begin on June 2 in Jeju, expand to the southern regions such as Jeolla Province around the 4th to 5th, and reach Chungcheong Province by the 7th to 8th.

Insurance companies anticipate that once the monsoon season fully begins, the loss ratio for automobile insurance will rise due to an increase in accidents on rainy roads and vehicle flood damage. Additionally, during the summer vacation period, which is a similar timeframe, domestic travel is expected to increase, likely leading to more vehicle accidents.

A representative from a major insurance company said, "This year's monsoon is forecasted to have higher rainfall than average from the start, so we predict a significant increase in vehicle flood damage," adding, "The impact of COVID-19, which helped stabilize loss ratios last year, appears to have diminished considerably due to recent vaccinations, and vehicle usage is gradually increasing."

The automobile insurance loss ratio has recently fallen below the break-even point of the 80% range. The preliminary loss ratios for automobile insurance from January to May for Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance were between 79.1% and 79.8%. In particular, the preliminary loss ratio for May was around 76-77%, largely due to reduced vehicle usage amid the ongoing COVID-19 spread.

However, since automobile insurance loss ratios typically begin to rise from June, insurers say it is too early to be complacent. Last year, the average loss ratio for 11 insurers in May was 87.8%, but it increased to 90.9% in June and remained high at 90.0% and 88.2% in July and August, respectively.

Even considering that the loss ratio did not rise sharply due to reduced vehicle use amid the COVID-19 pandemic, the seasonal characteristics cannot be ignored. Last year, heavy rains and typhoons concentrated in July and August caused automobile insurance claims amounting to 115.7 billion KRW.

Vehicles submerged in water are mostly covered without premium surcharges if the owner has comprehensive insurance. However, if the sunroof or windows were left open, or if the vehicle was driven into prohibited areas causing flooding, compensation is not provided. Compensation for items inside the vehicle is also excluded.

More than 90% of flooded vehicles reported to insurers are scrapped due to safety or repair cost issues, so compensation is limited to the vehicle's value at the time of the accident.

Additionally, flood and windstorm insurance, which covers damages to houses, greenhouses, factories, and other properties, has seen increased subscriptions recently, leading to a growing scale of insurance payouts. According to the Ministry of the Interior and Safety, flood and windstorm insurance payouts reached 26.8 billion KRW last year, marking the highest amount in the past decade.

Flood and windstorm insurance sold by five insurers?Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and NH Nonghyup Insurance?covers damage and flooding caused by nine types of natural disasters: typhoons, heavy rain, floods, strong winds, wind waves, tidal waves, heavy snow, earthquakes, and earthquake-induced tsunamis. The government and local governments subsidize more than 70% of the insurance premiums.

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