Premiums on insurance for vehicles to drop 2%

Korean non-life insurers will further slash auto insurance premiums in the face of financial authorities’ push triggered by a drop in their loss rate this year, sources said yesterday.

“Local insurers have reached a consensus to cut auto insurance premiums by an average of 2 percent in September or October,” an official from a local insurer said.

The move follows the Financial Supervisory Service’s pledge to go ahead with an additional premium cut this year following the significant fall in the loss ratio this year.

When combined with the earlier premium cut in April, the total discount will reach about 5 percent this year. It will be the first time local auto insurers have cut their auto insurance premiums two times in one year, sources said.

The loss ratio for car insurance refers to the proportion of coverage a non-life insurer pays to its policyholders from the premium. The higher the loss rate, the more likely the insurer will go into the red.

Samsung Fire & Marine Insurance, the country’s leading non-life insurer, saw its loss rate reach 68.4 percent last month, with the comparable figure for its rival Hyundai Marine & Fire Insurance standing at 66 percent.

The figures imply the auto insurance sector may enjoy profits this year after suffering a 500 billion won ($440.7 million) loss in the fiscal year 2011, sources said.

Rates between 70-72 percent are considered as a break-even point for large insurers while the comparable rate is 76 percent for smaller firms.

The cut will only be available for personal lightweight vehicles and passenger vans with 7 to12 seats, while foreign models and those with engines over 2.0 liters are to be excluded, sources said. Yonhap