Car Insurance Cumulative Loss Ratio Stabilizing... Industry Says It Will Rise with With-Corona

Down 5-6% Compared to Last Year
Maintained 80% Breakeven Point
Possibility of Deterioration Due to With-Corona Increase

[Asia Economy Reporter Ki Ha-young] The trend of stabilizing loss ratios in automobile insurance has continued this year. The loss ratios of the top four non-life insurance companies, which account for 85% of the market share, have fallen below the 80% range, raising expectations for profitability. However, the industry expects the loss ratio to worsen due to an increase in loss ratios since September, the phased return to normal life (With Corona), and the scheduled maintenance fee hike next month.

According to the non-life insurance industry on the 19th, the cumulative automobile insurance loss ratios of the top four companies?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance?were tentatively estimated at 78.2% to 79.8% as of October. Samsung Fire & Marine Insurance recorded 79.5%, Hyundai Marine & Fire Insurance 79.8%, DB Insurance 78.2%, and KB Insurance 79.5%, maintaining a stable trend below 80% for the top four companies holding 85% of the automobile insurance market share. Compared to the end of last year (84.4% to 85.6%), this is nearly 5-6% lower.

Although the loss ratio worsened in October compared to the previous month due to the easing of social distancing and increased vehicle traffic during the holiday season, the cumulative loss ratio appears to be managed stably. Considering operating expenses, the 80% level is known to be the breakeven point. Accordingly, expectations for automobile insurance profitability are growing, and there are forecasts that pressure to reduce automobile insurance premiums will intensify.

In fact, as automobile insurance loss ratios stabilize, the performance of non-life insurers has also continued to show strong results through the third quarter. Samsung Fire & Marine Insurance's cumulative net income for the third quarter this year was 1.022 trillion KRW, a 62.5% increase compared to the previous year. Hyundai Marine & Fire Insurance and DB Insurance also recorded 387.7 billion KRW and 645.5 billion KRW, respectively, up 23.2% and 46% year-on-year. During the same period, KB Insurance's net income surged 77.2% to 265.6 billion KRW.

However, non-life insurers maintain that the stabilization of automobile insurance loss ratios is temporary and that reducing automobile insurance premiums is difficult. They point out that the only year with an operating profit in automobile insurance over the past decade was 2017 (26.6 billion KRW), and cumulative deficits must also be considered. The cumulative deficit in automobile insurance from 2010 to 2020 reached 8.953 trillion KRW.

Moreover, the loss ratio for automobile insurance is expected to worsen in the remaining second half of the year. This is because vehicle operation continues to increase due to With Corona, and the average insurance payout for minor injuries is steadily rising. The average insurance payout for minor injuries increased from 1.48 million KRW in 2018 to 1.83 million KRW last year. Additionally, a 4.5% increase in maintenance fees is scheduled from next month.

An industry official said, "The stabilization of automobile loss ratios is a temporary phenomenon caused by COVID-19," adding, "With the implementation of With Corona, the number of accidents is rapidly increasing, and deterioration of automobile loss ratios is expected, so it is premature to discuss reducing automobile insurance premiums."

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