Rising Car Insurance Loss Ratios Due to Heavy Rain... Red Light for Car Insurance Premium Cuts in the Second Half

Flooded cars are parked at the temporary storage lot for flooded vehicles at Seoul Grand Park in Gwacheon-si, Gyeonggi-do, on the 18th of last month.
[Image source=Yonhap News]

[Asia Economy Reporter Changhwan Lee] Last month, the loss ratio of automobile insurance significantly increased due to a large number of flood-damaged vehicles caused by heavy rain. The profitability of automobile insurance, which had remained stable in the first half of the year, is expected to deteriorate in the second half.

According to the non-life insurance industry on the 19th, the average automobile insurance loss ratio of 11 domestic non-life insurers last month reached 88.3%. This is a sharp rise of 7.8 percentage points compared to 80.5% recorded in the same period last year. It is the highest figure this year, surpassing the 86.3% recorded in the previous month.

By company, MG Non-Life Insurance recorded 114.7%, Hana Non-Life Insurance 95.5%, AXA Non-Life Insurance 90.2%, Heungkuk Fire & Marine Insurance 89.7%, Lotte Non-Life Insurance 85.9%, Hanwha Non-Life Insurance 85.6%, Samsung Fire & Marine Insurance 83%, with most insurers showing worse figures compared to the previous month.

Insurers consider that if the automobile insurance loss ratio is maintained in the low 80% range, taking into account operating expenses, they can expect a profit. However, if it exceeds the high 80% range or 90%, the possibility of a deficit is high.

The sharp increase in the loss ratio last month was due to the extensive damage caused by heavy rain. In early last month, concentrated heavy rain centered around Gangnam, Seoul, resulted in 11,685 flood-damaged vehicles reported to insurers, with estimated damages reaching 163.7 billion KRW. The flood damage caused by the heavy rain in a short period was the largest ever recorded.

The deterioration of the loss ratio is expected to continue until September. This is because additional flood damage exceeding 50 billion KRW occurred due to Typhoon Hinnamnor earlier this month.

As the automobile insurance loss ratio soared in the second half of the year, it is also expected to affect the possibility of automobile insurance premium reductions. Financial authorities had announced plans to review whether to reduce premiums, as the automobile insurance loss ratio showed stability in the first half of this year. Non-life insurers reduced personal automobile insurance premiums by an average of about 1.2 to 1.4% earlier this year.

An insurance industry official said, "Due to increased vehicle flooding caused by concentrated heavy rain and typhoons after summer, the automobile insurance loss ratio has worsened," adding, "The deterioration of automobile insurance profitability is inevitable."

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