Non-life insurers are facing a car insurance dilemma, as their need for higher premiums to grapple with falling profits clashes with the government’s shared growth initiative, industry officials said Thursday.
The government wants to keep premiums low because car insurance has a heavy influence on the consumer price index and affects more than 25 million subscribers — nearly half of Korea’s population.
For non-life insurers, however, this strategy has become unsustainable, as they struggle with declining profits while premiums remain largely unchanged.
From left are Lee Mun-hwa, CEO of Samsung Fire & Marine Insurance, Lee Sugh-hyun, CEO of Hyundai Marine & Fire Insurance, and Jeong Jong-pyo, CEO of DB Insurance. Yonhap
A total of 31 non-life insurers nationwide posted a combined net profit of 6.46 trillion won ($4.39 billion) from January to September, a 19.6 percent drop from a year earlier.
The year-on-year decline was largely driven by the car insurance sector, where the five largest insurers — Samsung Fire & Marine Insurance, DB Insurance, Meritz Fire & Marine Insurance, Hyundai Marine & Fire Insurance and KB Insurance — posted a combined loss ratio of 93.2 percent, up 7.1 percentage points from last year.
In the third quarter alone, car insurance deficits reached 64.8 billion won at Samsung Fire & Marine Insurance, 53.3 billion won at Hyundai Marine & Fire Insurance, 44.2 billion won at KB Insurance and 8.9 billion won at Meritz Fire & Marine Insurance.
While DB Insurance was the only firm to post a profit, its earnings plunged 87.9 percent compared with the same period last year.
Despite such challenging conditions, the average car insurance premium remained nearly unchanged at 690,000 won in 2024, up only 3.6 percent from 2023.
A non-life insurance official, speaking on condition of anonymity, called the low-premium strategy “excessive and overreaching,” even though the industry understands the goodwill intent behind the shared growth initiative.
“We can’t share if we don’t make profit,” the official said.
He added that he does not “quite buy” the government’s stance that it does not intervene in car insurance pricing and leaves decisions to the market. “In reality, companies adjust their plans when they sense the government considers an increase inappropriate.”
The official expressed concerns that responsible managers at non-life insurers could face legal consequences, including breach of duty, if they fail to take necessary steps to restore profitability.
Industry officials are also concerned that profit deterioration may deepen as the government expands the shared growth initiative to other insurance segments.
Under a support package announced last month to raise birthrates, couples who have a baby or take parental leave can receive at least a one-year discount on child insurance premiums. Policyholders and their spouses may also defer payments on all types of life insurance.
“This effectively requires insurers to absorb some losses to help address the nation’s low birthrate problem,” the official said.