Despite Surge in December Emergency Dispatches, Auto Insurance Loss Ratio Holds Up Well

Big 4 Non-Life Insurers' Auto Insurance Loss Ratio at 80.5%... Down 0.5% YoY
Despite Increased Emergency Dispatches Due to Cold Wave and Heavy Snow, 'Holding Steady'

[Asia Economy Reporter Minwoo Lee] Despite a sharp increase in emergency dispatch service cases by non-life insurance companies due to heavy snowfall at the end of last year, the loss ratio of automobile insurance did not surge as feared. However, since insurance premiums will be lowered starting next month and automobile repair costs are also expected to rise in the future, there are forecasts that the loss ratio will increase further, placing a burden on the performance of non-life insurers.

According to the non-life insurance industry on the 25th, the average loss ratio of automobile insurance for the four major non-life insurers, which account for 85% of the market share, was recorded at 80.5%. This is 0.5% lower than the previous year's 81.0%. Considering that the industry generally views an appropriate loss ratio where insurers do not incur losses as between 78% and 82%, this can be seen as a relatively good performance.

Specifically, the figures were DB Insurance (79.8%), KB Insurance (80.2%), Hyundai Marine & Fire Insurance (80.3%), and Samsung Fire & Marine Insurance (81.7%). Compared to the previous year, except for DB Insurance (which rose by 0.30 percentage points), the other three insurers all saw a decrease of about 0.2 to 1.2 percentage points. Even on a standalone basis for December last year, the automobile insurance loss ratios of the four major insurers fell by 0.4 to 6.09 percentage points compared to the same month the previous year. Although seasonal factors made it inevitable for the loss ratio to worsen compared to the previous month, considering the sharp increase in automobile emergency dispatch services at the end of last year compared to the same month the previous year, this is regarded as a fairly decent result.

According to the industry, the number of emergency dispatch service cases for the four insurers in December last year was 65,908, which is 10,988 cases (20%) fewer than the same month the previous year. Emergency dispatch services are typically requested when urgent towing (rescue), tire replacement and repair, battery charging, unlocking, or emergency refueling are needed. There is a tendency for requests due to battery charging to increase especially during the severe cold of winter. The fact that emergency dispatches due to battery discharge reached 41,982 cases last year is also interpreted as being due to relatively frequent severe cold and heavy snowfall.

However, concerns have been raised that the current loss ratio is at a low point and only deterioration lies ahead. While automobile insurance premiums have been decided to be lowered, repair costs and other factors remain, inevitably increasing the burden on insurers. Earlier, seven companies including the four major insurers announced that they would reduce automobile insurance premiums by 2.0% to 2.9% starting as early as next month.

An industry official said, "Due to the impact of the COVID-19 resurgence, especially reduced outdoor activities caused by the spread of the Omicron variant in March this year, a special situation occurred where half of the four major insurers recorded an unprecedented loss ratio in the 68% range, which is why the loss ratio performed well this year," adding, "Once the ongoing repair cost increases are finalized, an increase in the loss ratio this year is inevitable."