Car insurers feel the heat as loss rate plummets

Korea’s non-life insurers’ loss rate is predicted to have fallen sharply in January from a year earlier, putting pressure on local firms to cut their insurance premiums, industry data showed yesterday.

The car insurance loss ratio of nonlife insurers is estimated to have fallen to an average of 74 percent as of end-January, from 83.5 percent tallied 12 months earlier, according to the non-life association sources.

The January projection is 5 percentage points lower than it is in December, marking the third consecutive month that numbers have declined on a monthly basis.

The loss ratio for car insurance refers to the proportion of coverage a non-life insurer pays to its policyholders from the insurance premium. The higher the loss rate, the more likely the insurer will go in the red. Such developments can lead to a marking up of insurance premiums.

Samsung Fire & Marine Insurance, the country’s leading non-life insurer, saw its loss rate reach 72.5 percent last month, with numbers for its rival Hyundai Marine & Fire Insurance standing at 73.5 percent.

The rates between 70 and 72 percent are considered as break-even points for large insurers, while smaller firms that operate online do so when the rate hits 76 percent.

With tumbling rates, non-life insurers are facing growing demand to slash their respective premiums, following record quarterly earnings for most of last year.

However, the insurers are hesitant to make the cut, saying the stellar performances in 2011 were backed by their asset management. Yonhap