Some non-life insurers have reportedly begun rate checks to cut auto insurance premiums. As the war among the United States, Israel, and Iran drags on and inflation pressures grow, financial authorities recently asked non-life insurers to lower auto premiums, prompting the move. Most non-life insurers are seeing mounting losses on auto insurance, and the burden is expected to grow.
According to financial authorities and others on the 1st, some non-life insurers recently asked the Korea Insurance Development Institute to verify rates for cutting auto insurance premiums. Requesting a rate check is a process to verify how far premiums can be lowered. Typically, insurers calculate premium rates, request verification, and then report to the Financial Supervisory Service based on the results before applying them.
The Financial Services Commission convened non-life insurer executives and officials from the General Insurance Association on Mar. 27 to discuss auto insurance support measures to respond to high oil prices. At the meeting, the Financial Services Commission (FSC) proposed premium discounts and refunds linked to driving restrictions such as a five-day vehicle rotation policy introduced due to the prolonged Middle East crisis. The five-day vehicle rotation limits driving based on the last digit of a license plate and the day of the week. The Financial Services Commission plans to finalize specific support measures after confirming, through the rate verification results from the Korea Insurance Development Institute, the expected decline in accident rates due to reduced driving.
If auto insurance premiums fall, the non-life sector is expected to face pressure on profitability. Non-life insurers cut auto premiums for four straight years from 2022 through last year, leaving cumulative losses. Last year's auto insurance balance recorded a deficit of 708 billion won. In response, the industry raised auto premiums by a little over 1% last month for the first time in five years, but now faces having to cut them again.
Overall revenue at non-life insurers is also declining. Last year, net profit at non-life insurers was 724.92 billion won, down 16.2% from a year earlier. Insurance results plunged by 2.6741 trillion won due to rising loss ratios in long-term and auto lines. An official at the Financial Services Commission (FSC) said, "We have begun reviewing how far we can apply special discounts on auto insurance."