Both Indemnity and Car Insurance Perform Well... Non-Life Insurers to Smile Again This Year

Reduction of 1.1 Trillion KRW in Indemnity Insurance Deficit
Auto Insurance Also Expected to Perform Well... Property & Casualty Insurers Outlook 'Clear' This Year

Non-life insurance companies achieved solid results last year in both indemnity medical insurance and automobile insurance, which had previously hindered their performance. With various measures to curb excessive medical treatments improved, there is a forecast that this trend can continue even after the effects of COVID-19 fade.

According to the Financial Supervisory Service on the 20th, non-life insurers recorded a loss of 1.5892 trillion won in indemnity insurance last year. Considering the 2.6888 trillion won loss in 2021, this represents a reduction of about 1.0996 trillion won in losses. The loss ratio (the ratio of claims paid to premiums received), which indicates the profitability of insurance products, also improved. It fell by 12.4 percentage points from 117.2% the previous year to 104.8%.

This improvement in performance resulted from the authorities' efforts to prevent excessive non-reimbursable treatments combined with premium increases. Earlier, the Financial Supervisory Service, together with the National Police Agency and the Korean Ophthalmological Society, announced a "Special Measure to Prevent Excessive Cataract Treatments and Insurance Leakage" in April last year. The following month, they revised the "Model Guidelines for Insurance Fraud Prevention." The increased share of 4th-generation indemnity insurance, which features higher deductibles but lower premiums and includes controls against excessive treatments, also played a key role. The share of 4th-generation indemnity insurance rose by 4.3 percentage points to 5.8% at the end of last year compared to the previous year. Additionally, premiums for 1st and 2nd-generation indemnity insurance policies subscribed before 2017 were raised by an average of about 16%, further aiding performance improvement.

Indemnity insurance is considered a national insurance product, with 39.97 million subscribers as of the end of last year. However, from the insurers' perspective, it had been a "troublesome asset" that consistently dragged down overall performance due to perennial losses. Nevertheless, this year, the performance of insurers, especially non-life insurers, is expected to remain solid. The business viability of indemnity insurance is improving, and automobile insurance, which also showed chronic losses, is expected to see performance improvements as well.

According to the Financial Supervisory Service, the operating profit of 12 non-life insurers' automobile insurance increased by 20.1% year-on-year to 478 billion won last year. The loss ratio also dropped by 0.3 percentage points from 2021, when external activities were restrained due to the peak of COVID-19, to 81.2%. This contrasts with the perennial losses seen until 2020. Even after the COVID-19 effect disappears this year, automobile insurance profitability is not expected to return to past levels. This is because the Financial Supervisory Service applied new standard automobile insurance terms from January this year, effectively preventing long-term excessive treatment of minor injuries in car accidents.

Accordingly, there is growing expectation that non-life insurers will achieve good results this year, even if not as record-breaking as last year. Last year, the net profits of five major non-life insurers?Samsung Fire & Marine Insurance, DB Insurance, Meritz Fire & Marine Insurance, Hyundai Marine & Fire Insurance, and KB Insurance?totaled 4.1089 trillion won, a 25.5% increase from the previous year. The combined net profit of the top five non-life insurers exceeded 4 trillion won for the first time ever. An industry insider said, "Although it is difficult to accurately estimate performance due to the introduction of IFRS17 and the new solvency regime (K-ICS), the atmosphere is not bad. While it may not be as record-breaking as last year, the business environment this year is not expected to be poor."