South Korea’s leading non-life insurer Dongbu Insurance Co. has decided to lower auto insurance premiums after the loss ratio in its auto insurance segment has improved. Its non-life peers are expected to follow suit soon, under the guidelines from the new liberal administration to shave the consumer burden of high insurance costs.

Dongbu Insurance said on Monday that it would cut its auto insurance premiums for corporate and business users by 1.3 percent and for individuals by 0.8 percent starting August 16. After its loss ratio in auto insurance sales has improved, the company has decided to share the gains with its policy holders, according to Dongbu Insurance.

The combined ratio - the measurement of an insurer’s profitability by comparing the incurred losses and expenses from daily operations against earned premium - of Dongbu Insurance’s auto insurance products fell 6.4 percentage points on year to 96.4 percent as of May 31. This means the company earned $3.6 in profit by selling auto insurance worth $100.

Meritz Fire & Marine Insurance Co. already adjusted down its auto insurance premiums for individuals by 0.7 percent in June and Hanwha General Insurance earlier this month announced that it would reduce its rates by 1.6 percent.

Other major non-life insurers in Korea such as Hyundai Marine & Fire Insurance Co. and KB Insurance Co. are also said to be mulling lowering auto insurance premiums.

Samsung Fire & Marine Insurance Co. that chopped its auto insurance premiums by 2.7 percent in December is reviewing an additional cut after its performance has improved with the combined ratio of its auto insurance products for January-May period reaching 95 percent despite the cut.

Dongbu Insurance’s move to cut its auto insurance premiums comes at a time when some regions in the country were hit by flood and heavy rains, leaving a number of car owners with damaged vehicles. Its prompt decision to reduce the rate is expected to give it an upper hand in the auto insurance market, said an unnamed insurance industry official. Its peers that have not made a decision are expected to follow suit as soon as they finish reviewing their loss ratio at summer’s end, the official predicted.

Some market watchers consider the non-life insurers’ move to cut auto insurance premiums as a way to dodge the new administration’s policy direction to cut casualty insurance premiums. The firms have cheated out by offering special discounts on auto insurance premiums instead of lowering the overall rates until June. Now, they seem to be trying to avoid standing against the new government by cutting down the rates of auto insurance instead of lowering that of casualty insurance with higher loss ratio, market watchers said.

By Park Joon-hyung

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]