Thousands of Flooded Cars Due to Water Bomb... Insurance Companies Face Continuous Losses

On the night of the 8th, a driver is evacuating after a vehicle was submerged on a road near Daechi Station in Gangnam-gu, Seoul. [Image source=Yonhap News]

[Asia Economy Reporter Changhwan Lee] Record-breaking heavy rain, approaching up to 400mm, poured over the central region, causing a surge in vehicle flooding damages. In the case of flooded vehicles, if the car insurance includes comprehensive coverage (self-vehicle damage coverage), the insurance company will provide compensation, so the insurers are also expected to face considerable losses.

According to the property and casualty insurance industry on the 9th, more than 1,000 flooded vehicles occurred due to the heavy rain in the metropolitan area the previous day. Insurance companies are currently assessing the number of flooded vehicles by company. Among major property insurers such as Samsung Fire & Marine Insurance, DB Insurance, and Hyundai Marine & Fire Insurance, as of the morning of that day, at least 200 to over 500 flooded vehicles were reported per company. Especially in the Gangnam area, a high-end residential and office building district, flooding damage occurred, resulting in many damages to expensive imported cars.

As of 8 a.m. that day, Samsung Fire & Marine Insurance received reports of flooding damage to more than 500 vehicles related to the previous day's heavy rain, of which over 200 were imported cars. The currently reported damage amount is about 9 billion KRW.

DB Insurance reported 248 flooded vehicles as of 8 a.m., with 85 of them being imported cars. The estimated damage amount reached approximately 2.5 billion KRW. Hyundai Marine & Fire Insurance received 214 flooded vehicle reports as of 7 a.m.

Combining all insurance companies, it is estimated that at least over 1,000 flooded vehicles occurred due to the heavy rain the previous day. Since rain continues mainly in some areas and reports of flooded vehicle damages are still being received, the final damage is expected to exceed 2,000 vehicles.

A DB Insurance official said, "As of 8 a.m. today, more than 200 flooded vehicles have been reported," adding, "Vehicle owners are continuously reporting damages to the company, so the number of flooded vehicles will increase."

As the number of flooded vehicles increases, damages are expected to surge rapidly. Already, damages exceeding 10 billion KRW have been tallied from just Samsung Fire & Marine Insurance and DB Insurance, and when combined with other insurers, damages exceeding 20 billion KRW are anticipated.

With the increase in flooded vehicle damages, the loss ratio of car insurance is also expected to rise. In the first half of this year, the car insurance loss ratios of five major property insurers?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, KB Insurance, and Meritz Fire & Marine Insurance?all recorded favorable figures in the 70% range.

Due to high oil prices and COVID-19 impacts reducing vehicle traffic, all five companies improved their loss ratios compared to last year. The insurance industry believes that maintaining the car insurance loss ratio in the low 80% range can still yield profits.

However, due to the damage from this heavy rain, there is speculation that the car insurance loss ratio for the third quarter may rise back into the 80% range. An industry official said, "Since the heavy rain concentrated in the Gangnam area, many expensive imported cars were flooded," adding, "As flooding damages increase, there will be a negative impact on the car insurance loss ratio."