"Auto Insurance Losses Decreased and Health Insurance Losses Increased After COVID-19"

Source: Korea Insurance Research Institute

[Asia Economy Reporter Changhwan Lee] While losses from automobile insurance in non-life insurance companies have significantly decreased since COVID-19, losses from disease and injury insurance have increased.

According to the Insurance Research Institute's report titled "Changes in Automobile and Medical Utilization and Non-Life Insurance Profitability" on the 5th, the growth rate of domestic automobile insurance incurred losses, which reached 9.1% in 2019, sharply dropped to 0.6% in 2020 and remained at around 2.7% in 2021.

The cause was the reduction in traffic volume and traffic accidents following the outbreak of COVID-19 in 2020. Accordingly, the loss ratio of automobile insurance also clearly improved from 92.8% in 2019 to 85.6% in 2020 and 76.5% in 2021.

This also helped improve the profitability of non-life insurance companies. The net profit of the non-life insurance industry increased from 2.2 trillion KRW in 2019 to 2.6 trillion KRW in 2020 and 4.3 trillion KRW in 2021. Automobile insurance, which had been in deficit for several years, turned profitable, thereby increasing the earnings of non-life insurers.

On the other hand, the growth rate of incurred losses in disease and injury insurance clearly increased to 10.5% in 2020 and 10.6% in 2021. Although medical utilization temporarily decreased in the early stages of COVID-19, it soon increased as social distancing measures were relaxed and more people visited hospitals.

Kim Sejung, a research fellow at the Insurance Research Institute, explained, "This suggests that medical utilization increased mainly in areas covered by insurance compensation during the relaxation of social distancing, as people resumed postponed medical use due to the spread of COVID-19."

He added, "The increase in medical utilization may be due to both deferred consumption by consumers and deferred supply by medical providers." It is also speculated that hospitals, which suffered losses due to COVID-19, strengthened marketing focused on medical procedures covered by indemnity insurance as social distancing eased.

Accordingly, the loss ratio of disease and injury insurance expanded from 80.9% in 2019, before COVID-19, to 81.4% in 2021.

Research fellow Kim evaluated, "The short-term impact of COVID-19 on automobile and medical utilization was significantly reflected only in the improvement of automobile insurance profitability."

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