Due to the COVID-19 Surge... Significant Improvement in Auto Insurance Loss Ratio in Q1

[Asia Economy Reporter Changhwan Lee] In the first quarter, as COVID-19 spread significantly, the loss ratio of automobile insurance for non-life insurance companies improved substantially. However, concerns have also been raised that the loss ratio may worsen again in the second half of the year as social distancing measures are eased.

According to the non-life insurance industry on the 19th, the average automobile insurance loss ratio of 11 major domestic non-life insurance companies in the first quarter of this year was finalized at 79.6%. This is a decrease of 3.7 percentage points (p) from 83.3% in the same period last year. The overall average automobile insurance loss ratio last year was 85.4%, so this represents an improvement of 5.8 percentage points.

In the first quarter, as the COVID-19 Omicron variant rapidly spread domestically, the volume of automobile traffic significantly decreased, and accidents also declined, leading to an improved loss ratio. On the 17th of last month alone, 621,328 confirmed COVID-19 cases were reported, marking a record high. The surge in international oil prices in the first quarter, which caused retail gasoline prices to rise, is also considered one of the reasons for the reduced vehicle operation.

Accordingly, the non-life insurance industry expects automobile insurance profits to improve significantly in the first quarter of this year as well, following last year. According to the Financial Supervisory Service, the total operating profit of domestic non-life insurance companies' automobile insurance last year was 398.1 billion KRW, turning positive for the first time in four years since 2017.

Last year, while the loss ratio decreased due to COVID-19, insurance premium income increased by 8.1% due to premium hikes and an increase in the number of insured vehicles. The size of the domestic automobile insurance market last year (based on gross written premiums) was 20.2774 trillion KRW, up 3.7% from the previous year, surpassing 20 trillion KRW for the first time.

Automobile insurance profitability is also expected to improve in the first quarter of this year. Ji-young Kim, a researcher at Kyobo Securities, stated, "Due to the decrease in automobile traffic caused by the expansion of COVID-19 confirmed cases in the first quarter, the automobile insurance loss ratio improved, and the profits of major non-life insurance companies such as DB Insurance, Hyundai Marine & Fire Insurance, and Hanwha General Insurance are expected to improve by around 10% compared to the same period last year."

However, since the number of COVID-19 confirmed cases has sharply decreased this month and the government has eased social distancing, if vehicle traffic increases again, there is concern that the loss ratio may worsen from the second quarter onward.

An insurance industry official said, "Non-life insurers are surprised that the automobile insurance loss ratio was better than expected in the first quarter," but added, "There are concerns that the loss ratio will worsen in the second half of the year as social distancing measures are lifted."

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