[Becoming an Insurance Insider] Has COVID-19 Reduced 'Nailong Patients'?

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[Asia Economy Reporter Oh Hyung-gil] The preliminary loss ratios for automobile insurance in October for the five major non-life insurers?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, KB Insurance, and Meritz Fire & Marine Insurance?ranged from 84.0% to 86.3%. This shows improvement compared to the same period last year, which ranged from 96.9% to 98.9%.

The cumulative loss ratios from January to October also improved compared to the previous year. Samsung Fire & Marine Insurance recorded 84.9%, Hyundai Marine & Fire Insurance 84.6%, DB Insurance 84.1%, KB Insurance 83.9%, and Meritz Fire & Marine Insurance 81.2%, showing a decrease of about 5 to 6 percentage points.

Since the spread of the novel coronavirus disease (COVID-19), the reduction in automobile usage has led to a decrease in automobile insurance losses. In particular, the effect of reduced excessive medical treatment by so-called 'nai-ron patients'?a major loss factor in automobile insurance?has become notably apparent.

According to the Korea Insurance Research Institute on the 22nd, the decrease in incurred losses is especially prominent in Personal Injury Coverage II (Daein II) within automobile insurance.

Statistics from the Korea Expressway Corporation show that nationwide traffic volume in February and March, when COVID-19 spread across the country, decreased by about 10% compared to the same period last year due to the pandemic, and it decreased by 7.8% in April as well. As of August, traffic volume continues to remain below usual levels.

With the decrease in automobile accident frequency, incurred losses for liability insurance, Personal Injury Coverage II, and property damage all declined.

However, for Personal Injury Coverage II, which covers personal injury compensation exceeding liability insurance, the Korea Insurance Research Institute explains that the combined effects of reduced accident frequency due to decreased automobile usage and reduced excessive medical treatment by nai-ron patients have led to a relatively significant decrease in incurred losses.

Since 2018, automobile insurance loss ratios have been steadily rising, reaching 105.9% in December last year, then falling to 79.2% in March 2020, and maintaining the mid-80% range as of August.

In particular, the expected loss ratio applied when calculating automobile insurance premiums is around 78%. Despite the decline in loss ratios due to the impact of COVID-19, the loss ratio still exceeds the expected loss ratio, indicating that losses continue, according to the institute's analysis.

Kim Se-jung, a research fellow at the Korea Insurance Research Institute, stated, "To alleviate consumer concerns such as premium increases caused by high automobile insurance loss ratios, measures such as promoting the use of alternative parts and improving the personal injury compensation system to reduce excessive medical treatment for minor injuries are under discussion." He added, "Since the improvement in automobile insurance loss ratios is interpreted as a temporary phenomenon due to COVID-19, discussions on system improvements need to continue."