Results at major non-life insurers slowed in the first quarter of this year as profit and loss in auto insurance deteriorated. With the industry's anticipated introduction of the "8-week rule" delayed and the recently rolled out odd-even driving endorsement layered on top, the burden of restoring profitability is growing.
According to the insurance industry on the 20th, first-quarter standalone net profit at the five major non-life insurers — Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and Meritz Fire & Marine Insurance — totaled 1.7453 trillion won, down 12.2% from a year earlier. By company, the declines were steep at DB Insurance (-39.9%) and KB Insurance (-33%). Samsung Fire & Marine Insurance (3.2%), Hyundai Marine & Fire Insurance (9.9%), and Meritz Fire & Marine Insurance (0.8%) posted slight profit increases.
Deterioration in auto insurance profit and loss is cited as the key backdrop of the weak results. Most recorded losses — Meritz Fire & Marine Insurance (-6.4 billion won), Samsung Fire & Marine Insurance (-9.6 billion won), Hyundai Marine & Fire Insurance (-14 billion won), and KB Insurance (-24.9 billion won) — while only DB Insurance maintained a surplus of 8.8 billion won. The loss ratio also worsened. The first-quarter auto insurance loss ratio at the five insurers averaged 85.2%, up 2.7 percentage points from 82.5% a year earlier.
There is criticism that the deterioration in auto insurance profitability is a structural problem. In line with the financial authorities' win-win stance, premiums have been cut for years, while expenses such as labor and treatment costs have steadily increased. On top of that, a rise in the number of accidents has fueled the higher loss ratio.
The industry is pinning hopes on the "8-week rule," but its introduction is being delayed. The 8-week rule requires additional documentation if a patient with minor injuries receives treatment for eight weeks or more. The insurance industry expects the 8-week rule to curb overtreatment, but the Korean medicine community is pushing back.
The "odd-even driving endorsement," promoted by the government as part of its response to the Middle East situation, is also a burden. It offers up to a 2% discount on premiums for those who participate in an odd-even driving scheme. While introduced to conserve energy, it could lead to reduced premium income for insurers.
An industry official said, "Each company is preparing its own self-help measures, but improving auto insurance profit and loss is not easy when premium hikes are limited," and added, "It will be difficult to expect a significant improvement in profitability for the time being."