[Getty Images Bank]
[Getty Images Bank]

South Korea's major non-life insurers posted a cumulative auto insurance loss ratio of 84.5% in the first half of this year, up from the same period last year — remaining in deficit territory even after the industry raised premiums for the first time in five years.

According to insurance industry data released Wednesday, the four largest non-life insurers — Samsung Fire, Hyundai Marine & Fire Insurance, DB Insurance and KB Insurance — recorded a simple average cumulative auto insurance loss ratio of 84.5% for January through June, up 1.9 percentage points from a year earlier. The loss ratio for June alone came in at 83.6%, also up 1.9 percentage points from the same month last year.

The four companies together hold more than 85% of the auto insurance market, and all posted cumulative loss ratios above 84%. The industry generally regards 80% as the break-even threshold for auto insurance, meaning a loss ratio above that level is in effect a loss-making position. With the ratio exceeding that benchmark throughout the first half, profitability in the auto insurance segment has continued to deteriorate.

The rising loss ratio reflects both the limited scale of this year's premium increase and persistent leakage of insurance payouts through excessive medical claims. Non-life insurers raised personal auto insurance premiums by 1.3 to 1.4 percent starting in February — the first increase since 2021 and a reversal of four consecutive years of cuts and freezes. However, analysts note that cumulative reductions from 2022 through last year totaled around 7 to 8 percent, making it difficult for a roughly 1 percent hike this year to offset the full effect of those earlier cuts.

The deeper problem is that payouts are growing structurally even as premium income stagnates. The number of accidents has plateaued, but the average payout per claim is rising. The growing share of high-value vehicles — electric vehicles, hybrids and imports — has driven sharp increases in parts and repair costs, with property damage coverage leading the deterioration in the loss ratio.

Excessive medical treatment is the other major driver of payout leakage. The share of oriental medicine costs within auto insurance medical claims surged from 23 percent in 2015 to 59.2 percent in 2024, with payouts for oriental medicine treatment alone reaching 1.7 trillion won ($1.15 billion). A recurring problem is so-called "malingering patients" — people with minor injuries who repeatedly seek extended outpatient treatment. The government has sought to introduce an "8-week rule" requiring patients with minor injuries to submit medical documentation such as a diagnosis certificate if treatment extends beyond eight weeks, but implementation has been delayed amid opposition from the oriental medicine community.

The outlook is not encouraging. July typically sees a spike in accidents as the monsoon season and summer vacation travel overlap, pushing the loss ratio higher. This year, a late-arriving rainy season is expected to compound the problem, with concentrated downpours raising the risk of flood damage and falling-object incidents alongside increased holiday traffic.

"With the late July monsoon and the start of the summer vacation season, accident volumes are expected to rise, making the loss ratio outlook negative going forward," an industry official said. "The cumulative deficit in auto insurance will likely expand compared to last year." The official added that "it is urgent to address the fundamental problem of payout leakage through policy reforms such as the 8-week rule to manage long-term treatment by minor-injury patients."


psj@heraldcorp.com