Under repeated pressure from the ruling party and government... Car insurance premium reduction announcement as early as the 21st

Insurance Companies to Announce Sequentially from the 21st
Reiterating Pressure on Ruling Party and Government with 'Livelihood Support'
Concerns Over Weakened Justification Due to Rising Loss Ratios and Labor Costs

[Asia Economy Reporter Minwoo Lee] As the ruling party and government apply renewed pressure, insurance companies are expected to expedite the reduction of automobile insurance premiums. Given the low loss ratio of automobile insurance and the fact that it is easier to lower premiums before the repair industry’s calls for increased labor costs grow louder, the plan is interpreted as prioritizing the completion of automobile insurance premium reductions within the year before adjusting the actual loss insurance premiums.

According to the insurance industry on the 20th, major non-life insurers such as Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, and DB Insurance are expected to announce automobile insurance premium reduction plans as early as the 21st. The reduction rate is anticipated to be around 2%. Initially, a 1% reduction was considered, but as voices from the political sphere criticized this as too low, the rate appears to have risen to around 2%. Mid-sized companies like Lotte Insurance and Meritz Fire & Marine Insurance are reportedly considering reductions exceeding the mid-2% range.

The automobile insurance premium reduction was originally scheduled to be announced this month along with adjustments to actual loss insurance premiums. However, as financial authorities and politicians applied renewed pressure, insurance companies hurried to prepare the automobile insurance premium reduction plan first. An industry insider said, "It’s hard to recall a time when we were pressured this much repeatedly," adding, "We had no choice but to advance the originally planned schedule."

The ruling party and government accelerated the process because they viewed the current timing as appropriate, mindful of public opinion. Automobile insurance premiums, which are mandatory for vehicle owners, are included in the Consumer Price Index (CPI). Given the high inflation era, this move is justified under the banner of 'supporting people’s livelihoods.' Politicians and authorities have emphasized that since the automobile insurance loss ratio has room for adjustment, a magnanimous reduction should be made.

The loss ratio is the proportion of insurance claims paid out by insurers relative to the total premiums received from policyholders. The automobile insurance loss ratios of five companies?Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, Meritz Fire & Marine Insurance, and KB Insurance?averaged 77.9% from January to September this year. Since the breakeven point for automobile insurance loss ratios is generally in the low 80% range, the ruling party and government believe the industry has the capacity to reduce premiums. Especially as loss ratios tend to rise toward the end of the year and the automobile repair industry’s calls for labor cost increases grow louder, it is judged that if the reduction is delayed beyond year-end, the justification for demanding support for people’s livelihoods from insurers will diminish.

Meanwhile, the actual loss insurance premium increase rate is expected to be announced as early as this week. Initially, insurers argued that a double-digit increase was inevitable due to an annual deficit of around 2 trillion won caused by excessive medical treatments in actual loss insurance. However, considering the public burden and inflation, the increase rate will be capped at a maximum of 9%. Once the specific increase rate is decided, it will be applied starting January next year.