Non-life in­sur­ers face fall­ing prof­its on ris­ing loss rate

The Korea Times - - FINANCE - By Jhoo Dong-chan [email protected]­re­atimes.co.kr

The na­tion’s non-life in­sur­ers, who were hit hard by more than a 100 per­cent loss rate in the au­to­mo­bile in­surance sec­tor last month, are ex­pected to suf­fer an even worse loss rate in the sec­tor this month.

They have raised car in­surance pre­mium twice this year in an at­tempt to cut the losses, but their ever-wors­en­ing busi­ness in the sec­tor shows no signs of re­cov­ery.

Do­mes­tic non-life in­sur­ers re­cently an­nounced a plan to down­size their in­surance ben­e­fits while again rais­ing car in­surance pre­mi­ums, but face strong op­po­si­tion from cus­tomers as well as the fi­nan­cial au­thor­i­ties.

In­dus­try in­sid­ers said do­mes­tic non-life in­sur­ers suf­fered dis­ap­point­ing earn­ings in the first half of the year and are likely to see a con­tin­ued down­trend in the se­cond half due to de­te­ri­o­rat­ing loss rates in the sec­tor.

The na­tion’s largest non-life in­surer Samsung Fire & Marine In­surance said it posted a 426.1 bil­lion won ($357.2 mil­lion) net profit in the first half, down 36 per­cent from a year ago.

An­other non-life giant, Hyundai Marine &Fire In­surance, marked a 163.9 bil­lion won net profit in the pe­riod, but this was also down at 36.1 per­cent from the same pe­riod last year.

Data sug­gest the in­sur­ers are likely to con­tinue to see dis­ap­point­ing earn­ings for a while be­cause of the ty­phoons that hit the penin­sula this month.

Ac­cord­ing to a study re­leased by the Gen­eral In­surance As­so­ci­a­tion of Korea, in­surance claims from Typhoon Lin­gling to­taled 6.94 bil­lion won dur­ing the first week in Septem­ber.

“Lin­gling didn’t come up with heavy rain, so there weren’t that many in­surance claims, but the fol­low­ing Typhoon Ta­pah brought a down­pour and quite a num­ber of cars were flooded or de­stroyed. This will raise the loss rates in the au­to­mo­bile sec­tor,” said an in­dus­try in­sider ask­ing not to be named.

The study sug­gested the loss rate in the au­to­mo­bile in­surance sec­tor of the na­tion’s nine largest non-life in­sur­ers stood at 98.8 per­cent and 100.1 per­cent in July and Au­gust, re­spec­tively.

This means do­mes­tic non-life in­sur­ers paid 988,000 won and over 1 mil­lion won in car in­surance claims in July and Au­gust for ev­ery 1 mil­lion won worth of au­to­mo­bile pre­mi­ums they re­ceived each month.

An­a­lysts said the de­te­ri­o­rat­ing loss rates in the car in­surance sec­tor will slow down an earn­ings re­cov­ery for do­mes­tic non-in­sur­ers.

“Gen­er­ally, car in­surance claims in­creased in the se­cond half. These firms are un­likely to post strong earn­ings due to their car in­surance busi­ness,” said DB Fi­nan­cial In­surance re­searcher Lee Byung-gun.

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