Insurance industry faces muted outlook despite premium hikes in 2026
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Although premium hikes for auto insurance and indemnity health insurance are set for 2026, the insurance sector remains pessimistic as modest increases, combined with already elevated loss ratios, are unlikely to deliver a meaningful boost to its profitability, dampening expectations for a swift earnings turnaround, industry officials said Wednesday.
After four straight years of cuts, auto insurance premiums are expected to rise for the first time in five years, with financial authorities considering an increase in the low-to-mid 1 percent range.
Amid the government’s continued push for “shared growth,” non-life insurers reduced auto insurance premiums for four consecutive years, cutting rates by 1.2 to 1.4 percent in 2022, 2 to 2.5 percent in 2023, 2.1 to 3 percent in 2024 and 0.6 to 1 percent in 2025. At the same time, higher claims per accident and rising costs have put additional pressure on auto insurance loss ratios.
Industry data shows that the average auto insurance loss ratio at the four largest non-life insurers — Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance and KB Insurance — reached 92.1 percent in November. The cumulative ratio for the January-November period climbed to 86.2 percent, up 3.8 percentage points from a year earlier and well above the 80 percent level typically viewed as the break-even point.
Industry officials, however, expect that the planned premium hikes will not lead to an immediate earnings turnaround in 2026.
In auto insurance, repair and maintenance costs continue to rise by 2 to 3 percent annually, while accumulated losses from four years of rate cuts weigh heavily on profitability, making a low-1-percent increase insufficient for meaningfully improving results.
“The expected hike is more likely to curb further deterioration than restore profitability,” an official at a non-life insurer said.
Indemnity health insurance is in a similar position. The average premium increase for 2026 is estimated at about 7.8 percent, which is 1.2 percentage points below the five-year weighted average annual increase of 9 percent.
Insurers said the hike reflects a heavier loss burden driven by rising payouts linked to excessive use of certain non-covered medical services and insurance fraud.
By the third quarter of 2025, the cumulative risk loss ratio for indemnity health insurance had exceeded 100 percent, meaning insurers were paying out more in claims than they were collecting in risk premiums.
Fourth-generation indemnity health insurance recorded the worst performance with a loss ratio of 147.9 percent. The figure stood at 138.8 percent for third-generation plans, followed by 113.2 percent for first-generation policies and 112.6 percent for second-generation plans.
Readings above the 100 percent indicate operating losses.
Industry officials stressed that premium increases alone cannot fundamentally reverse deteriorating loss ratios caused by the expanding use of non-covered treatments, underscoring structural constraints that could persist unless stricter oversight is introduced.
Acknowledging the issue, the government plans to designate high-cost, nonessential, non-covered treatments as “managed benefits” and incorporate them into the national health insurance system to enable price regulation as part of broader indemnity insurance reforms.
“Indemnity health insurance could see some stabilization if follow-up measures such as the managed benefit system are implemented swiftly, but a meaningful recovery in profitability remains unlikely,” one industry official said.