Car insurance in Korea expected to see lower rates

Development in line with president's initiative promoting "mutual growth"

Car insurance in Korea expected to see lower rates

Market observers have reported that car insurance rates in South Korea are anticipated to decrease by approximately 3%. This expected reduction aligns with President Yoon Suk Yeol's initiative promoting “mutual growth.”

According to a report from The Korea Times, the adjustment forms a significant part of a financial support package, estimated at around KRW1 trillion (US$773 million), set to benefit small and medium-sized enterprises (SMEs).

It is compulsory for car owners in South Korea to have insurance, with penalties for non-compliance ranging up to KRW5 million or a maximum one-year prison term. The financial package is to be jointly supported, with life and non-life insurers each bearing half of the cost.

Further details on the insurance rate reduction are expected to be disclosed around Dec. 6, following a meeting between local insurance firm leaders and the heads of the Financial Services Commission, Chairman Kim Joo-hyun, and the Financial Supervisory Service, Chairman Lee Bok-hyun.

The proposed cut in car insurance premiums of up to 3% comes at a time when the insurance industry in South Korea has been experiencing a period of strong financial performance. This is further supported by stable loss rates. For instance, the combined net profit of the top five non-life insurers in South Korea — which includes Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, Meritz Fire & Marine Insurance, and DB Insurance — reached over 5.7 trillion won in the first nine months of this year, marking an 8.1% increase from the previous year.

The loss rate for the country's car insurers was reported at 83.7% in the first ten months of this year, a slight decrease from the same period last year. Specifically, the top five insurers recorded an average loss rate of 78.6% during this period, down from 79.8% a year earlier. A loss rate below 80% is generally considered profitable for the car insurance sector.

However, some market analysts have expressed concerns that this reduction in premiums could impact the insurers' performance, especially considering that loss rates typically increase in winter due to factors like challenging driving conditions and higher costs for maintenance work.

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