Non-life insurers face falling profits on rising loss rate
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.