Car Insurance Premiums Expected to Be Reduced as Early as Next Week... Around 2-3% Cut

Insurance Companies Complete Rate Reduction Calculations
Perceived Impact Decreases Amid Real Loss Insurance Premium Hikes

Amid pressure from financial authorities for cooperative finance, insurance companies are expected to announce reductions in car insurance premiums as early as next week, and by the end of this month at the latest. Although there are differences by company, the reduction rate is generally expected to be in the mid-2% range. Since car insurance is mandatory for vehicle owners, many will benefit, but combined with the increase in actual medical insurance premiums, consumers' perceived effect is expected to be limited.

According to the industry on the 13th, non-life insurance companies are working on setting the reduction rates for car insurance premiums. A representative from an insurance company said, "We have created several reduction rate plans and are reviewing them," adding, "Once an internal decision is made, we plan to report the reduction rates to the Insurance Development Institute soon." The industry expects the reduction rate to be decided at up to 3%, generally in the mid-2% range.

With financial authorities applying pressure for cooperative finance, insurance companies are once again preparing to reduce car insurance premiums. Unlike previous years, when premium reductions were made after compiling the annual car insurance loss ratio figures, this year’s schedule has been arranged more quickly. It is anticipated that the premium reduction will be finalized as early as next week or by the end of this month at the latest. This is because financial authority leaders are strongly urging cooperative finance across the board, and the political sphere has also begun calling for car insurance premium reductions in consideration of next year’s general elections.

In fact, on the 6th, Kim Ju-hyun, Chairman of the Financial Services Commission, and Lee Bok-hyun, Governor of the Financial Supervisory Service, met with insurance company CEOs, emphasizing that insurers must fulfill their social responsibilities and urging them to participate in cooperative finance. Yoo Ui-dong, Policy Committee Chairman of the People Power Party, also said at the party’s floor strategy meeting on the 24th of last month, "Operating profits from car insurance up to the third quarter of this year have already exceeded last year’s level," and added, "Large car insurance companies with good operating performance should take the lead in exploring the capacity for premium reductions."

The industry is currently hesitant to be the first to reduce car insurance premiums and is watching closely. Authorities hope that the 'Big 4'?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance?which hold 85% of the market share, will take the lead. A representative from an insurance company explained, "Most internal reduction rates have been decided, but there is reluctance to be the first to announce," adding, "Once one company announces, others will follow in quick succession."

Contrary to the cooperative pressure from authorities and the political sphere, there is also a view that the actual perceived effect of the premium reduction by consumers will not be significant. This is because an increase in premiums for actual medical insurance, which is called the second health insurance with nearly 40 million subscribers, is inevitable. According to the Korea Insurance Research Institute, the loss ratio of actual medical insurance (the ratio of paid claims to received premiums) was 118% up to the third quarter of this year. This means that for every 1,000 won of premium received, 1,180 won was paid out in claims. The loss ratios of the first and second generations of actual medical insurance, which reached 130-140%, have dropped to 120.5% and 109.6%, respectively, but the loss ratio of the third generation actual medical insurance soared to 154.9%.

An industry official said, "The number of actual medical insurance subscribers is much higher than that of car insurance subscribers," adding, "Even those who have both insurances may see their total insurance premium expenditures increase, so it will be difficult to feel the effect of cooperative finance."