(C) Policy House
SEOUL – South Korean non-life insurers are set to raise auto insurance premiums by an average of 1.5% next year, marking the first hike in five years since 2021. The decision comes as the industry faces massive losses following a four-year streak of government-pressed premium cuts.
According to industry sources on the 28th, major insurers, including Samsung Fire & Marine Insurance, are finalizing plans to increase premiums by approximately 1.5%. Given that the average annual premium for personal vehicles is around 700,000 KRW, policyholders are expected to see an increase of about 10,000 KRW ($7.50) per person.
While insurers technically have the autonomy to set rates, auto insurance is a mandatory coverage in Korea and a key component of the government’s inflation management. Consequently, rate adjustments are typically decided after close consultation with financial authorities.
Mounting Deficits and Rising Costs The primary driver behind the hike is a severe deficit. The industry estimates that total losses from auto insurance will reach between 500 billion and 600 billion KRW this year. This would represent the largest deficit since 2019, when losses hit 1.6 trillion KRW.
The industry argues that the financial strain is the result of a "perfect storm":
Cumulative Impact: Premiums were lowered for four consecutive years (2022–2025) to ease the public's cost-of-living burden.
Inflationary Pressures: The costs of auto parts and labor (repair fees) have continued to climb steadily.
A Compromise with Regulators Although insurers initially pushed for a 3% increase to stabilize their balance sheets, financial regulators reportedly intervened to minimize the impact on consumer prices. As a result, the industry settled on a modest 1% range.
Analysts warn that even with next year's hike, the "deficit shock" is unlikely to subside immediately, as the increase may not fully offset the rising costs of claims and repairs. The new rates are expected to take effect starting in March or April next year, depending on each company’s policy start dates.
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