Non-life insurers are dealing with a automotive insurance coverage dilemma, as their want for greater premiums to grapple with falling earnings clashes with the federal government’s shared development initiative, trade officers stated Thursday.
The federal government needs to maintain premiums low as a result of automotive insurance coverage has a heavy affect on the buyer value index and impacts greater than 25 million subscribers — practically half of Korea’s inhabitants.
For non-life insurers, nevertheless, this technique has develop into unsustainable, as they battle with declining earnings whereas premiums stay largely unchanged.
From left are Lee Mun-hwa, CEO of Samsung Hearth & Marine Insurance coverage, Lee Sugh-hyun, CEO of Hyundai Marine & Hearth Insurance coverage, and Jeong Jong-pyo, CEO of DB Insurance coverage. Yonhap
A complete of 31 non-life insurers nationwide posted a mixed internet revenue of 6.46 trillion received ($4.39 billion) from January to September, a 19.6 p.c drop from a yr earlier.
The year-on-year decline was largely pushed by the automotive insurance coverage sector, the place the 5 largest insurers — Samsung Hearth & Marine Insurance coverage, DB Insurance coverage, Meritz Hearth & Marine Insurance coverage, Hyundai Marine & Hearth Insurance coverage and KB Insurance coverage — posted a mixed loss ratio of 93.2 p.c, up 7.1 proportion factors from final yr.
Within the third quarter alone, automotive insurance coverage deficits reached 64.8 billion received at Samsung Hearth & Marine Insurance coverage, 53.3 billion received at Hyundai Marine & Hearth Insurance coverage, 44.2 billion received at KB Insurance coverage and eight.9 billion received at Meritz Hearth & Marine Insurance coverage.
Whereas DB Insurance coverage was the one agency to submit a revenue, its earnings plunged 87.9 p.c in contrast with the identical interval final yr.
Regardless of such difficult situations, the common automotive insurance coverage premium remained practically unchanged at 690,000 received in 2024, up solely 3.6 p.c from 2023.
A non-life insurance coverage official, talking on situation of anonymity, known as the low-premium technique “extreme and overreaching,” despite the fact that the trade understands the goodwill intent behind the shared development initiative.
“We are able to’t share if we don’t make revenue,” the official stated.
He added that he doesn’t “fairly purchase” the federal government’s stance that it doesn’t intervene in automotive insurance coverage pricing and leaves choices to the market. “In actuality, firms modify their plans once they sense the federal government considers a rise inappropriate.”
The official expressed considerations that accountable managers at non-life insurers might face authorized penalties, together with breach of responsibility, in the event that they fail to take obligatory steps to revive profitability.
Trade officers are additionally involved that revenue deterioration might deepen as the federal government expands the shared development initiative to different insurance coverage segments.
Below a help bundle introduced final month to boost birthrates, {couples} who’ve a child or take parental depart can obtain not less than a one-year low cost on baby insurance coverage premiums. Policyholders and their spouses might also defer funds on all forms of life insurance coverage.
“This successfully requires insurers to soak up some losses to assist deal with the nation’s low birthrate drawback,” the official stated.
