Major property and casualty insurers saw their auto insurance loss ratios exceed 90% last month, intensifying pressure for premium increases following similar moves in health insurance.
The four largest insurers—Samsung Fire & Marine Insurance (000810.KS), Hyundai Marine & Fire Insurance (001450.KS), DB Insurance (005830.KS), and KB Insurance—posted a combined auto insurance loss ratio of 92.1% in November, according to financial industry sources on Wednesday. The ratio surpassed 90% for the second time in two months, following 94.1% in September, though it was 0.3 percentage points lower than the same period last year.
The cumulative loss ratio from January through November reached 86.2%, up 3.8 percentage points from a year earlier. The insurance industry considers 80% the break-even point for auto insurance, meaning ratios above that level effectively push insurers into loss territory.
Market analysts attribute the rising loss ratios to the cumulative impact of four consecutive years of premium cuts since the COVID-19 pandemic, combined with increasing claim costs per accident.
"Cost pressures are mounting from excessive medical treatment for minor injuries, along with rising parts prices, repair costs, and minimum wage increases," an industry official said. "Even large insurers that avoided losses last year will inevitably post significant losses this year."
The sharp rise in loss ratios this year has dealt a direct blow to insurers' earnings. The industry estimates that Korean property and casualty insurers' auto insurance losses will reach around 600 billion won this year, compared to a 9.7 billion won loss last year. This would mark the largest loss since 2019, when the sector recorded losses of 1.6445 trillion won. The four major insurers, which generated combined net profits exceeding 200 billion won from auto insurance last year, are also likely to swing to losses for the first time in five years.
With auto insurance losses snowballing, insurers say premium increases next year are unavoidable. Samsung Fire & Marine Insurance, the industry leader, has officially announced it is considering raising auto insurance premiums next year, while other major insurers are weighing the timing and extent of potential increases.
However, actual rate hikes face significant hurdles as auto insurance premiums are included in the consumer price index and have a considerable impact on inflation. With the current administration still in its early stages and local elections scheduled for June next year, insurers are reluctant to raise premiums hastily. Some observers predict that premium increases may be delayed until after the local elections.
"From the price authorities' perspective, the local elections will be a concern," an industry official said.
