Local life insurers' profitability falls

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By Anna J. Park

Local insurance companies' loss ratios have risen to their highest levels in five years, indicating the deteriorated profitability of life insurance products.

Loss ratio refers to an insurer's incurred losses from paying out coverage divided by the total amount earned in premiums. The figure is used to gauge insurance companies' fiscal soundness for profitability, as the firms need to collect an adequate amount of premiums to cover their total number of life insurance claims.

According to the life insurance industry, Friday, the average loss ratio of 22 life insurers based in Korea stood at 86.9 percent, as of the end of the first quarter of this year, which is up 5.5 percentage points compared to the same period last year. The ratio is also at its highest level since the end of 2016, when the burning-cost ratio was 87.5 percent.

Many of the companies even logged loss ratios of over 100 percent, meaning that the losses they incurred from paying out insurance coverage were more than the estimated sum of premiums they earned.

DGB Life Insurance's loss ratio stood at 114.8 percent, the highest among local life insurers, followed by AIA Life at 104 percent and Shinhan Life at 101.5 percent.

KDB Life and Fubon Hyundai Life also posted loss ratios of nearly 100 percent, hitting 98.9 percent and 97.1 percent, respectively. Other major life insurers, including Hana Life, Heungkuk Life and Samsung Life, all logged loss ratios in the 90s percentage range, reflecting the firms' vulnerable fiscal conditions.

A worsening loss ratio also means that firms' underwriting processes for assessing the risks of clients applying for insurance plans has been failing to function properly. Industry insiders point out that if the current situation continues for the long term, it will be the customers who will bear the damages in the end, as the increased loss ratios will be reflected in hiked premiums.