Despite Record Heavy Rain, Few Vehicle Damages... Car Insurance Expected to Perform Well Again This Year

Third Highest Rainfall Record in History Marks End of This Year's Jangma
Vehicle Damage Scale Moderate...Due to Less Damage in Major Cities
Auto Insurance Loss Ratio Expected to Remain Stable

Despite record-breaking rainfall during the monsoon season, vehicle damage was relatively low. It is expected that the loss ratio (the ratio of paid insurance claims to received premiums) of automobile insurance, which has been a perennial deficit product, will remain stable this year as well.

On the 27th, the Korea Meteorological Administration announced that the monsoon season ended as of that day. It lasted 31 days since it began on June 26. The nationwide average rainfall was 648.7mm, double the average amount for this period. This is the third highest amount since 1973, following 2006 and 2020. When comparing 'rainfall per rainy day,' this year recorded 30.6mm, surpassing 2006 (26.1mm) and 2020 (24.4mm).

Nevertheless, vehicle damage caused by the rain remained at a moderate level. According to the industry, from June 27 to July 19, 12 non-life insurance companies selling automobile insurance estimated that there were 1,453 vehicle damage claims related to the monsoon and heavy rains, with damages amounting to approximately 13.4 billion KRW. Compared to the concentrated heavy rain in early August last year that caused flood damage worth 100 billion KRW in Seoul and the metropolitan area over two days, this is about one-eighth of that amount.

The relatively low damage this year is attributed to fewer damages in large cities with many high-value vehicles. Estimated damages were 539 million KRW in Seoul and 561 million KRW in Busan. This is about one-quarter compared to 2.425 billion KRW (281 cases) in Chungnam and 2.28 billion KRW (excluding Osong) in Chungbuk. Other large cities such as Incheon (159 million KRW), Daegu (26 million KRW), and Daejeon (194 million KRW) also reported minor damages. Gwangju was somewhat higher at 1.239 billion KRW.

Considering this, the automobile insurance loss ratio is expected to remain stable this year. According to the industry, the cumulative loss ratio for automobile insurance in the first half of this year for the four major non-life insurers?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance?which hold about 85% of the market, was 77.1%, rising only 0.5 percentage points compared to the same period last year. Not only the big four but also Meritz Fire & Marine Insurance, Hanwha General Insurance, and Lotte Insurance recorded loss ratios in the 70% range. Generally, the loss ratio range where insurers do not incur losses on automobile insurance is between 78% and 82%.

There were concerns that the loss ratio would increase further due to rising maintenance costs from inflation, reductions in automobile insurance premiums, and increased mobility following the end of the COVID-19 situation, but it appears to have remained stable. With the monsoon season’s heavy rains passing without significant vehicle damage, non-life insurers are expected to achieve profits in automobile insurance again this year. Automobile insurance, which had recorded perennial deficits, posted a profit of 398.1 billion KRW for the first time in 2021 due to reduced mobility from COVID-19. Last year, it also recorded a profit of 478 billion KRW. However, the typhoon season in September remains a variable.

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