Record High Car Insurance Profits in First Half of Year, Further Premium Reductions Expected

Trends in Automobile Insurance Loss Ratio and Profit (Source: Financial Supervisory Service)

[Asia Economy Reporter Changhwan Lee] Domestic insurance companies recorded the highest-ever profits from automobile insurance in the first half of this year.

As automobile insurance profitability stabilized even after the endemic phase, the supervisory authorities announced plans to encourage non-life insurers to adjust their premiums.

According to the "2022 First Half Automobile Insurance Business Performance and Future Supervisory Directions" report released by the Financial Supervisory Service (FSS) on the 5th, non-life insurers' operating profit from automobile insurance in the first half of this year reached 626.4 billion KRW, an increase of 212.7 billion KRW compared to the same period last year. This is the highest level on record for the first half of a year.

The automobile insurance loss ratio in the first half was 77.1%, down 2.3 percentage points from the same period last year. This is the lowest level since the 77.8% recorded in 2017.

The FSS explained that this was mainly due to a decrease in losses caused by a reduction in traffic accident rates and an increase in premium income due to a rise in the number of insured vehicles.

The size of the automobile insurance market (based on gross written premiums) in the first half was approximately 10.3731 trillion KRW, about 3.0% higher than the previous year due to an increase in the number of insured vehicles.

The FSS evaluated that contrary to expectations that accident rates would sharply increase due to increased vehicle operation after the endemic phase, the loss ratio improved compared to the same period last year (79.4%), which posted significant operating profits.

Considering the recent strengthening of the legal environment, such as amendments to the Road Traffic Act leading to a downward trend in accident rates, the stabilization of automobile insurance loss ratios is expected to continue in the second half of the year.

Accordingly, the FSS plans to closely examine the capacity of non-life insurers to reduce premiums and to encourage premium adjustments that reflect loss ratios and business performance, aiming to minimize the burden of automobile insurance premiums on the public.

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