After Stopping Leakage in Indemnity Insurance... Insurance Companies' Performance Soared

[Asia Economy Reporter Changhwan Lee] In the second quarter, domestic non-life insurance companies recorded better-than-expected strong earnings. This is attributed to the improvement in the loss ratio of indemnity health insurance (실손보험) due to crackdowns on excessive cataract treatments.

According to the insurance industry on the 18th, the combined net income of five non-life insurers?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, Meritz Fire & Marine Insurance, and Hanwha General Insurance?in the second quarter reached 1.2406 trillion KRW, a 30.7% increase compared to the same period last year.

Samsung Fire & Marine Insurance's net income for the second quarter was 340.8 billion KRW, up 9% year-on-year. Its long-term risk loss ratio improved by 4.9 percentage points to 84.5% compared to the same quarter last year.

The government and the insurance industry regulated excessive cataract treatments, significantly reducing indemnity insurance claims. Samsung Fire & Marine Insurance’s indemnity insurance payouts for cataract surgeries were about 60 billion KRW in the first quarter but shrank to the low 20 billion KRW range in the second quarter.

Along with indemnity insurance, automobile insurance, which had been a low-profit business, also contributed to earnings improvement as its loss ratio improved. In the second quarter, Samsung Fire & Marine Insurance’s automobile insurance loss ratio was 78.5%, entering a stable profit zone. After years of losses, automobile insurance turned profitable last year due to reduced traffic during COVID-19.

Other non-life insurers showed similar trends. Hyundai Marine & Fire Insurance’s net income in the second quarter surged 63.3% year-on-year to 200.1 billion KRW. Cataract-related insurance claims decreased by more than 40 billion KRW in the second quarter, significantly exceeding market expectations. The related loss ratio also improved by 16 percentage points. The automobile insurance loss ratio fell 1.7 percentage points to 76.9% year-on-year.

DB Insurance’s net income in the second quarter rose 20.1% year-on-year to 282.6 billion KRW. During the same period, Meritz Fire & Marine Insurance’s net income increased 49.7% to 241.8 billion KRW, and Hanwha General Insurance’s surged 86.9% to 75.3 billion KRW. All three companies saw significant earnings growth due to improvements in indemnity and automobile insurance loss ratios.

Insurers expect earnings improvements to continue into the third quarter. With strong determination from financial authorities and the insurance industry to prevent leakage in indemnity insurance, loss ratio improvements are expected to persist, and automobile insurance loss ratios are also anticipated to remain in the profit zone.

A non-life insurance industry official said, "The loss ratios of major businesses improved, resulting in strong first-half earnings," adding, "We expect this trend to continue in the second half."

Researcher Taejun Jeong of Yuanta Securities explained, "Fundamental issues in indemnity insurance such as insurance fraud, excessive treatment, and overcharging are being resolved through strong crackdowns by financial authorities," adding, "Thanks to this, the long-term risk loss ratio is rapidly improving, and the profitability of non-life insurers will continue to improve."