South Korean insurance companies are planning to cut their premiums by 2.5 to 3 percent in 2024, with Meritz Fire & Marine Insurance Co. announcing the largest cut in the non-life insurance industry at 3 percent and Samsung Fire & Marine Insurance Co. and KB Insurance Co. cutting their premiums by 2.6 percent. There were talks of cuts in the mid-1 percent range as recently as fall 2023, but analysts say that the cuts have widened as the cumulative auto insurance loss ratio, or claims divided by total subject premium, stabilized by falling below 80 percent through November and financial authorities push for “win-win financing” to lower the burden for consumers.

According to the non-life insurance industry on Wednesday, Samsung Fire & Marine Insurance and KB Insurance decided to cut their auto insurance premiums for individuals by 2.6 percent starting with contracts taking effect after mid-February 2024. Hyundai Marine & Fire Insurance Co. and DB Insurance Co. will cut their personal auto insurance premiums by 2.5 percent, Lotte Insurance Co. by 2.4 percent and Hanwha General Insurance Co. by 2.5 percent.

According to the Korea Insurance Development Institute, the average personal auto insurance premium per diver in Korea is around 720,000 won ($552.57). A 2.5 percent cut in auto insurance premiums will save consumers about 18,000 won, and a 3 percent cut will save them about 21,600 won.

Auto insurance premiums for two-wheelers will be reduced by 8 to 13.6 percent in 2024, with Samsung Fire & Marine Insurance cutting its two-wheeler insurance premiums by 8 percent starting with contracts that are effective from mid-February next year. KB Insurance will reduce premiums by 13.6 percent for personal two-wheelers and 12 percent for personal delivery motorcycles from contracts effective after mid-January 2024.

The insurers’ decision to cut auto insurance premiums comes as their loss ratio remained stable. According to the non-life insurance industry, the average cumulative auto insurance loss ratio at the country’s four largest insurers from the beginning of the year to November was 79.3 percent, similar to the 79.6 percent figure from the same period in 2022. The insurance industry considers a 78 to 82 percent range to be adequate, but the average auto insurance loss ratio from 2013 to 2022 was 85.6 percent.

Analysts note that the financial authorities’ push for win-win financing has also had a major impact. Financial authorities instructed the insurance industry as well as banks to come up with a practical win-win plan in November, and the insurance industry has shown its commitment to follow the directive by increasing cuts for auto insurance premiums in 2024.

By Yoo Joon-ho and Choi Jieun

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