Cracks in the Facade: Car Insurance Profits Plummet as Loss Ratios Soar
Image of decreased profit and loss in car insurance generated by Chat GPT./Image generated by Chat GPT
The non-life insurance industry, which has been breaking records every day, is being held back by auto insurance. With the negative factors of consecutive auto insurance premium cuts and rising loss ratios, auto insurance profits and losses are decreasing.
According to the insurance industry on the 9th, the profits and losses from automobile insurance in the first half of this year for the four major domestic non-life insurance companies (Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, and KB Insurance) all decreased.
By insurance company, Samsung Fire & Marine Insurance’s car insurance profit and loss in the first half of this year was 149 billion won, down 26.1% from 202 billion won in the same period last year. Looking at the second quarter alone, car insurance profit and loss was halved, down 50.9% from 95 billion won in the previous year to 47 billion won.
DB Insurance’s auto insurance profit and loss in the first half of this year decreased by 10.7% to KRW 162 billion from KRW 182 billion last year. Original insurance premiums decreased by 1.4% from KRW 2.302 trillion last year to KRW 2.27 trillion. The auto insurance loss ratio increased from 78.2% in the first quarter to 79.2% in the second quarter.
Hyundai Marine & Fire Insurance recorded KRW 82.5 billion in auto insurance profits in the first half of the year, down 44.6% from KRW 148.9 billion a year earlier. Looking at the second quarter alone, it fell by nearly half, to KRW 40.1 billion, down 45.4% from KRW 73.4 billion in the same period a year earlier.
KB Insurance also recorded a profit and loss of 35.2 billion won in auto insurance in the first half of the year, a 50.1% decrease from the previous year’s 70.5 billion won, halving.
The reason for the shrinking car insurance profits and losses in the non-life insurance industry is the increase in loss ratio due to the reduction in car insurance premiums for several years. Non-life insurance companies have reduced car insurance premiums for three consecutive years since 2022 after COVID-19. They reduced premiums by 1.2-1.4% in 2022 and 2-2.1% in 2023. In February of this year, they significantly increased the reduction rate to 2.5-3% through mutual finance at the request of financial authorities.
An insurance industry insider explained, “Due to the continuous reduction in car insurance premiums, the loss ratio is bound to rise, which will inevitably lead to a decrease in car insurance profits and losses.”
Due to the aftereffects of the insurance premium cut, the loss ratio of car insurance has been rising sharply recently. Last month, the loss ratio of car insurance was found to have exceeded the break-even point of 80%, raising concerns about the worsening loss ratio of car insurance.
Last month, the average loss ratio of the four major non-life insurance companies was 82.2%, up 3.8 percentage points (p) from 78.4% in the same month last year. By insurance company, ▲KB Insurance 84.4% ▲Hyundai Marine & Fire Insurance 82.4% ▲Samsung Fire & Marine Insurance 81.6% ▲DB Insurance 80.5%, etc., all of which exceeded 80%. The cumulative loss ratio of the four non-life insurance companies from January to July also increased by 2.4 percentage points from 77.5% last year to 79.9% this year.
The industry predicts that there will be talk of raising car insurance premiums at the end of this year and early next year. Considering the increase in loss ratio, it is expected that car insurance profits and losses will turn into deficit in the second half of the year, so insurance companies are expected to pull out the car insurance premium increase card.
An insurance industry insider said, “In cases like this year, there were cases like car flood damage in July, so in the second half of the year when the car insurance loss amount for July is evaluated, car insurance profits and losses will enter the red,” adding, “Insurance companies will take care of their own loss ratio defense, but they cannot prevent the overall decline in profits and losses.”
He added, “The issue will become clearer as we move into the second half of the year, so it seems inevitable that car insurance premiums will increase next year.”