Insurers may lower car insurance rates by 3%

Financial Services Commission Chairman Kim Joo-hyun / Yonhap

Insurers are expected to lower annual car insurance rates by 3 percent, in line with a “mutual growth” drive spearheaded by President Yoon Suk Yeol, market watchers said Tuesday.

This will make up the bulk of a financial aid package worth about 1 trillion won ($773 million) to be introduced by life- and non-life insurers for small and medium-sized businesses. Car owners must be insured or face a fine of up to 5 million won or a prison term of up to one year. Half of the 1 trillion won will be shouldered equally by life insurers and non-life insurers. 

Specifics will come around Dec. 6 when a meeting between heads of local insurance firms with Financial Services Commission Chairman Kim Joo-hyun and Financial Supervisory Service Chairman Lee Bok-hyun is scheduled.

Kim and Lee met with heads of the country’s top financial groups last week, followed by heads of 17 local commercial lenders, Monday. They called for low-interest loan programs for small businesses and low-income earners. 

The reduction of up to 3 percent in car insurance premiums is not that much of an ask for the insurance industry on a streak of record-breaking performance over the past year, buoyed further by stable loss rates. 

The net profit of the top five non-life insurers — Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, Meritz Fire & Marine Insurance and DB Insurance — came to over 5.7 trillion won in the first nine months of this year, up 8.1 percent from a year earlier. 

The loss rate of the country’s car insurers came to 83.7 percent in the first 10 months of this year, down half a percentage point from the same period last year.

The figure for the top five averaged 78.6 percent in the same period, down 1.2 percentage points from 79.8 percent the same period of last year.

A level below 80 percent is considered a profit for the car insurance industry.

Some market watchers say the move could dent car insurers’ performance due to loss rates that usually rise in the winter because of seasonal factors including poorer driving conditions as well as higher-than-usual wages for maintenance workers and fees.

“The rates will be finalized before the end of this year and the new rates will be applied in January next year,” an industry official said. 

Car insurers cut premiums by about 1.4 percent in April last year, and by a further 2.5 percent in February this year.