Insurance companies get snowed under storm

An unusually harsh winter and the unprecedented snowstorm have given Korea’s auto insurers a major headache, as a growing number of car accidents on slippery roads means more claims by policyholders.

A preliminary tally by local auto insurers indicates that they will face the worst business margins in years because of skyrocketing insurance claims for accidents caused by the extreme weather.

The ratio of claimed damages to the insurers’ premium collection is considered a major gauge of insurance companies’ business margins and profits. The higher the number of losses, the lower the margins the insurers will earn.

According to the tally by the General Insurance Association of Korea, the average loss ratio among local auto insurers for December amounted to 82.8 percent, the highest such figures since November 2006, when a loss ratio of 83.5 percent was posted.

Auto insurers generally consider 70 percent the break-even point. Once the number goes above that level, the companies start to face operating losses.

The local general insurers’ monthly loss ratio hovered between 60 and 80 percent from January to November last year, before jumping beyond the 80 percent mark in December.

The auto insurers blame the weather for their eroding profitability.

According to the local weather service, Korea had nine snowy days in December, and even a snowfall of 2.6 centimeters (1.02 inches), on Dec. 27, which is enough to cause traffic problems on the road.

Throughout the nine snowy days, a total of 189,400 accidents were reported to 15 auto insurers. Those figures indicate a rise of nearly 72 percent compared to the same days in other years.

During this period, 58,800 people were reportedly killed or injured on the roads, an increase of 61 percent compared to normal days.

But the insurance industry representatives lamented the worst is yet to come.

On Jan. 4, the biggest snowfall in almost a century nearly paralyzed transportation systems across the country, causing countless car accidents.

“The only thing we can do for now is pray that there won’t be any snow for the rest of the winter,” said one employee at Samsung Fire & Marine Insurance.

By Jung Ha-won, Kim Won-bae [hawon@joongang.co.kr]