Auto Insurance Deficit Swells to 700 Billion Won Last Year... Loss Ratio Worsens, Negative for Second Year Running

Deficit Surges from 9.7 Billion to 708 Billion Won...
"Exceeds Expectations"
Authorities Move to Block Excessive Claims by "Nailong Patients"

Last year, the loss ratio for auto insurance worsened, resulting in underwriting losses for automobile insurance for the second consecutive year. The deficit surged from 10 billion won in 2024 to 700 billion won in 2025, exceeding the industry’s forecast of 500 to 600 billion won. Financial authorities have announced plans to strengthen oversight of so-called "Nailong patients"—those who make excessive insurance claims for minor treatments—in order to ease the insurance premium burden on the public.

On the 13th, ahead of the Lunar New Year holiday, traffic congestion is occurring on the Gyeongbu Expressway near Banpo IC in Seocho-gu, Seoul. Photo by Yonhap News Agency

According to the "2025 Auto Insurance Business Performance (Provisional)" released by the Financial Supervisory Service on the 25th, direct premiums written for auto insurance last year amounted to 20.289 trillion won, a decrease of 1.8% from the previous year’s 20.6641 trillion won.

This is attributed to the fact that auto insurance premiums have been reduced for four consecutive years. The average reduction rates were -1.2% in 2022, -1.9% in 2023, -2.5% in 2024, and -0.8% last year, marking a consistent decline over the four-year period.

Last year, the combined ratio (loss ratio plus expense ratio) for the auto insurance sector exceeded the break-even point of 100% by 3.7 percentage points, resulting in a deficit of 708 billion won. After swinging from a surplus of 553.9 billion won in 2023 to a deficit of 9.7 billion won in 2024, last year saw a significant expansion of the losses. While auto insurance revenue decreased, the number of claims increased by 0.3% to 3,838,000 cases compared to 3,827,000 cases in the previous year. In addition, stagnation in the growth of the auto insurance industry and the cumulative effect of premium reductions further eroded profitability.

The expense ratio (net expenses/earned premiums) remained similar to the previous year at 16.2%, compared to 16.3% in the prior year. However, the loss ratio surged by 4.4 percentage points to 87.6%, up from 83.2% the previous year.

However, investment income recorded a surplus of 803.1 billion won, resulting in a total profit of 95.1 billion won. Investment income increased by 34.1% (204.3 billion won) from the previous year’s 598.8 billion won.

Last year, major companies such as Samsung, Hyundai, KB, and DB maintained an oligopolistic market structure, accounting for 85.0% of market share. The share of mid-sized insurers (Meritz, Hanwha, Lotte, Yebyeol, Heungkuk) rose by 1.1 percentage points to 9.4%, while the share of online-only specialists (AXA, Hana, Carrot) fell by 0.8 percentage points to 5.6%.

The Financial Supervisory Service plans to pursue regulatory improvements to reduce the public’s insurance premium burden.

An official from the Financial Supervisory Service stated, "We are continuously consulting with related agencies to establish measures that prevent excessive treatment for some minor injury patients, so that innocent victims of auto accidents are not disadvantaged," adding, "If the loss ratio for auto insurance improves as a result of these regulatory changes, we will ensure that this leads to future reductions in auto insurance premiums."

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