This year, the cumulative loss ratio for automobile insurance is reported to be around the breakeven point, and competition among insurance companies over raising premiums is expected to intensify. The fact that the decision on whether to raise premiums has not yet been made is due to this reason.
According to the insurance industry on the 28th, the cumulative loss ratio for automobile insurance from January to November of this year at the four major property and casualty insurance companies (Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, DB Insurance) is 82.5%, an increase of 3.2 percentage points compared to last year (79.3%). This is attributed to the end of COVID-19 and the increase in vehicle traffic, along with climatic factors such as floods and heavy snowfall.
The breakeven point for automobile insurance is a loss ratio of 78% to 82%. If the combined ratio, which is the sum of the loss ratio and expense ratio, exceeds 100%, the insurance company incurs a loss. Overall, it is difficult to say that the industry is in significant deficit or that it is in profit.
Particularly, due to the variation of more than 2 percentage points in loss ratios among insurance companies, it is difficult to assertively call for premium increases. Among the cumulative loss ratios for the four major property and casualty insurance companies from January to November, Hyundai Marine & Fire Insurance had the highest at 83.5%, while DB Insurance had the lowest at 81.2%. Samsung Fire & Marine Insurance was recorded at 82.2%, and KB Insurance at 82.9%.
Automobile insurance premiums are included in the consumer price index, and whether to raise or lower them is known to be discussed implicitly and unofficially between insurance companies and financial authorities. The financial authorities, which represent consumer interests, may express reluctance toward premium increases. The fact that the average premium for third-generation real insurance, which will approach 10 million subscribers starting next year, is set to increase by 30% could also influence discussions on raising automobile insurance premiums.
The insurance industry holds the position that raising premiums is inevitable. This is because they have consecutively lowered premiums by 1% to 2% three times over the past two years as part of win-win finance, resulting in increased burden. Additionally, with the rise in vehicle maintenance fees, raising premiums is deemed necessary.
The insurance industry expects that whether to raise premiums will depend on the loss ratio in December. If the December loss ratio settles, even if premiums rise, the increase is likely to be modest. On the other hand, if the loss ratio soars, insurance companies are expected to advocate for premium increases. Ultimately, serious discussions about raising premiums are expected to start in early next year.
The insurance industry sees no relation between the decision on whether to raise automobile insurance premiums and the impeachment political situation. Thus far, the decision on premium increases has been based on the loss ratio of the previous year and determined in the following year. However, in the last two years, the automobile insurance has clearly been expected to record profits, making it easier to decide on premium reductions.
An industry insider noted, 'Currently, looking only at the loss ratios, there is a difference of more than 2 percentage points among companies,' adding, 'It is not easy to predict the decision on premium increases at this time due to the ambiguous loss ratios.' The insider also mentioned, 'It will be necessary to observe which company has seen a surge in the December loss ratios,' stating, 'It is difficult to believe that discussions will be delayed.'