[Becoming an Insurance Insider] Is the COVID-19 Rebound Effect Ending... Car Insurance Loss Ratio Stirring

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[Asia Economy Reporter Oh Hyungil] Since the COVID-19 pandemic, the loss ratio of automobile insurance, which had been stable, has recently started to rise again. Although the accident rate decreased due to reduced vehicle operation, insurance payouts have increased due to rising medical expenses.

According to the insurance industry on the 26th, as of last month, the automobile insurance loss ratios of the four major non-life insurers?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance?were tentatively estimated at 85.5% to 87.4%. Their automobile insurance loss ratios appear to have rebounded from the 79.5% to 84.0% range in October.

By insurer, Samsung Fire & Marine Insurance's loss ratio rose the most, increasing by 7 percentage points from 79.5% to 86.5%. Next, Hyundai Marine & Fire Insurance increased by 5.2 percentage points (from 82.3% to 87.4%), DB Insurance by 4.7 percentage points (from 80.8% to 85.5%), and KB Insurance by 3 percentage points (from 84.0% to 87.0%). These four non-life insurers account for 85% of the total automobile insurance market.

The non-life insurance industry attributes the sharp rise in loss ratios to an increase in accident volume following the implementation of the With-Corona policy, which led to more vehicle operation. In fact, the average daily number of automobile accidents increased from 19,906 in October to 21,485 in November.

Seasonal factors such as increased vehicle accidents due to heavy snow and icy roads in winter, as well as a 4.5% average increase in vehicle maintenance fees starting from the 1st of this month, were also cited as factors contributing to the rise in automobile insurance loss ratios.

According to the Korea Insurance Research Institute, the automobile accident occurrence rate declined around 2010 but dropped sharply after the start of COVID-19 in 2020.

The occurrence rate of bodily injury liability accidents, unlike property damage liability, continuously decreased from 2012 to 2017 but rose in 2018 and 2019, then declined again from 2020 to the first half of 2021.

Notably, insurance payouts per accident increased even last year when COVID-19 spread began. For property damage liability, this was attributed to the growing proportion of imported cars, and for bodily injury liability, to increased medical expenses per person.

Although vehicle operation frequency decreased and accident occurrence rates fell due to the COVID-19 spread, the trend of increasing insurance payouts per accident is expected to continue for both bodily injury and property damage liability.

Jeon Yongsik, a research fellow at the Korea Insurance Research Institute, said, "Due to supply chain instability and rising prices caused by COVID-19, the increase in insurance payouts per property damage liability accident is expanding," adding, "The increase in insurance payouts per bodily injury liability accident is presumed to be accelerating due to moral hazard."

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