Nonlife insurers draw back from auto premium cut

Korea's nonlife insurance companies have withdrawn a plan to cut down their auto insurance premiums within this year, largely due to a worsening profit outlook, industry sources said Sunday.

Major players including Samsung Fire & Marine Insurance Co. and Dongbu Insurance Co. pulled back from providing policyholders cheaper premiums for automobile insurance, as the estimated loss ratio is predicted to weigh down their future performance, according to the sources.

Their cumulative loss ratio surpassed the adequate level to 80.2 percent as of September, with a 26.3 billion operating loss in the auto insurance business.

The decision came as local credit card firms recently notified insurance companies here of a 30 percent hike in transaction commission fees, following a regulatory move to revamp the card fee system.

It will likely cost nonlife insurers an extra 75 billion won ($69.3 million) per year for the fees incurring from auto insurance alone. They already cut the auto insurance premium by 2.5 percent in April, pressured by the watchdog's move.

Also, fast-growing online-based auto insurers here have been a threat to existing players, with their market share currently rising to 26 percent.

The industry is expected to suffer further losses as it has recently fared worse in asset management performance. The combined aggregate loss of local nonlife insurers amounted to 7 trillion won this year since fiscal 2011, according to the company data. (Yonhap)