Consumers displeased with insurance premium hikes amid downturn

By Lee Kyung-min

A growing number of insurance subscribers are expressing displeasure with planned premium hikes as many households struggle to cope with the ongoing economic downturn.

“I received a notice from an insurance company that I will have to pay more for my subscriptions next year,” a 45-year-old office worker surnamed Kim said.

“The news reports say the premiums will be hiked up to 20 percent. The combined hikes of a handful of insurance products I signed up for will be an unexpected, unwanted extra expenditure, especially since my salary is likely to stay more or less the same.”

The frustration is shared by many subscribers amid the current slowdown. Insurers with soaring loss rates can resort to premium hikes ― the easiest and most convenient way to recuperate snowballing losses.

Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, DB Insurance and Meritz Fire & Marine Insurance have sent out notifications to customers whose subscriptions need to be renewed in January 2020. Hanwha and NongHyup are expected to follow suit today.

While the collective move seeks to establish grounds prior to the hike in line with the relevant guidelines, it is not clear whether the financial authorities will give a go-ahead to what they consider a substantial economic burden to the public.

The Financial Services Commission (FSC) Chairman Eun Sung-soo will meet the heads of insurers Dec. 19.

He is expected to exert pressure against the planned premium hikes including those for auto insurance, the subscription of which is compulsory for all vehicle owners.

Also to be discussed is whether the FSC should accept the non-life insurers' outcry on heavy losses following the implementation of the so-called “Moon Jae-in care.”

The insurers claim the strengthened state healthcare coverage has resulted in a marked deterioration of their profit margins.

Their loss rate ― the rate of insurance money paid to subscribers from companies' premium income ― was 129.1 percent in the first six months of 2019, up 20 percentage points from the year before.

This means insurers paid out 12,910 won ($11) after they collected 10,000 won in premiums. On this basis insurers claim a double-digit hike is inevitable.

Auto insurers have been hit hardest, having seen their loss rate standing at 96.4 percent in the first nine months of 2019.

This is far higher than the rate of around 77 percent deemed appropriate by the industry. The auto insurance industry is expected to log a net loss of 1.5 trillion won in 2019.

“The 20 percent hike is too overblown a figure,” an industry official said. “Negotiations between the FSC and the industry will together finalize the number but single-digit increases are more likely than double-digit ones.”