Car Insurance Premiums on the Rise: Can You Still Save in a Challenging Market
- The auto insurance loss ratios of non-life insurance companies are on the rise, casting uncertainty over whether car insurance premiums will be lowered this year.
- According to the non-life insurance industry, the average auto insurance loss ratio of seven non-life insurance companies (Meritz, Hanwha, Lotte, Samsung, Hyundai, KB, DB) as of last month...
- Loss ratio refers to the ratio of insurance premiums paid to subscribers out of the premiums received by the insurance company.
Auto Insurance Loss Ratios Continue to Rise, Uncertainty Over Premium Reduction
Increasing Loss Ratios and Uncertainty Over Premium Reduction
The auto insurance loss ratios of non-life insurance companies are on the rise, casting uncertainty over whether car insurance premiums will be lowered this year. The insurance industry believes that the burden is heavy due to the worsening loss ratio in a situation where insurance premiums have been lowered for three consecutive years.
According to the non-life insurance industry, the average auto insurance loss ratio of seven non-life insurance companies (Meritz, Hanwha, Lotte, Samsung, Hyundai, KB, DB) as of last month was 83.7%. This is a 5.3% increase from 78.4% in the same period last year, and exceeds last year’s loss ratio of 80.5%. It has continued to rise since hitting 80% last June.
Understanding Loss Ratios and Break-Even Points
Loss ratio refers to the ratio of insurance premiums paid to subscribers out of the premiums received by the insurance company. The industry usually sees the break-even point as 80%. If it exceeds this limit, even if the insurance product is sold, it is considered unprofitable or in deficit, excluding marketing and incidental costs.
Car insurance premiums are calculated at the end of the year, and whether or not to reduce them is discussed and decided between financial authorities and insurance companies. An insurance company official said, “We believe the break-even point of the loss ratio is in the low 80% range,” and added, “As it is expected to exceed this figure, lowering the insurance premium is burdensome.”
Factors Contributing to Increasing Loss Ratios
The industry believes that, in fact, the number of newly registered vehicles is not increasing much, but fixed costs, such as rising parts prices, are continuing to increase. In addition, it is analyzed that as the number of vehicles driven this year has increased, the loss ratio has also increased.
Moreover, it is expected that the recent electric vehicle fire in Cheongna, Incheon, will also have an impact on the loss ratio. Due to electric vehicle fires, car owners have applied for damage coverage (auto insurance) to insurance companies for up to 600 vehicles. The insurance company has stated that it will pay the insurance money for the damage first and claim the right to indemnification if liability is found based on the results of an analysis by the National Forensic Service, etc.
Expert Insights on the Impact of Electric Vehicle Fires
An insurance company official said, “In the grand scheme of things, if it were a typical electric vehicle accident, the number of accidents would not be large, but it would not have a significant impact. Since this fire was a very large accident, there were a large number of cars, so we have to monitor the situation.”
An official at the Korea Insurance Research Institute said, “There are various causes that affect automobile insurance loss ratios, such as flooded vehicles,” and added, “If the break-even point is exceeded, the burden on insurance companies will increase.” He continued, “Electric vehicle fires are expected to be affected due to the large amount of insurance payments.”