Auto Insurers Rev Up for Price War

With full liberalization of automobile insurance premiums imminent, Korea's nonlife insurance companies have entered into a cutthroat price war.

Medium and low-ranking auto insurers are trying to seize the opportunity to expand their share in the market, offering high discount rates on their premiums.

Each insurer is targeting specific customers. Ssangyong Fire & Marine Insurance Co. has eased up on first-time applicants. Most insurers charge an extra premium rate of 60 percent on first-timers, and Ssangyong has lowered that rate to 40 percent.

For instance, beginning in August, an employee in his thirties, who has bought a 1,500cc compact sedan for the first time, will have to pay 910,000 won ($698) a year for a policy for commuting and family-only use of the car, down from the current 1.3 million won.

Hyundai Marine & Fire Insurance Co. and First Fire & Marine Insurance Co. plan to make new auto buyers their long-time customers. Hyundai has cut the differential premium rates, 5 to 10 percent lower than competitors, in the second and third years for customers who buy the company's policy upon purchasing a new vehicle. First has slashed premiums by 16 percent for policyholders with three years of experience or more.

Dongbu Fire & Marine Insurance is more favorable to female drivers than males. A female driver with two years' experience and a Hyundai Motor 1999-vintage Avante sedan, can buy Dongbu's policy at 34,300 won, down 16.7 percent from the current level.

Shindongah Fire & Marine Insurance Co. will charge 1 to 2 percent less on male drivers than on females.

The top four auto insurers - Samsung, Hyundai, LG and Dongbu - have cut their premiums by an average of 2 to 3 percent. In contrast, smaller companies said that they will lower theirs by an average of 10 percent.

Fueling the price competition, Directz Insurance Co., which specializes in auto insurance, has announced that it will sell policies at least 15 percent less than other firms' products for drivers of all ages.

While customers can benefit from the fierce competition, experts are concerned about possible side effects. "Too-deep cuts in insurance premiums may deal a fatal blow to financially weak insurers in the long term," said an official at the Korea Non-Life Insurance Association.

by Choi Hyeon-chul