Auto insurers set for record claims over heavy rains

The record rainfalls in the Seoul metropolitan area this week are expected to lead to the largest-ever claims for South Korean auto insurance firms to cover the damage on several thousands of flooded vehicles.

The floods swept through the capital city and nearby areas from Monday to early Wednesday, including low-lying areas in wealthy districts in southern Seoul. The heavy rains claimed 11 lives and left eight people missing as of Thursday.

About 6,000 cars have been damaged due to the torrential rain, with foreign brands accounting for one-third of them, according to Yonhap news agency.

Industry insiders put the estimated damage on the flooded vehicles at 130 billion won ($100 million) in aggregate, which would be the largest-ever for the auto insurance sector in South Korea.

The figure is above the 116 billion won in vehicle damage in 2020, caused by the series of typhoons that hit hard the country.

Samsung Fire & Marine Insurance Co., the sector leader, has received claims for about 3,000 flooded vehicles as of 3 pm local time on Aug. 10. Their estimated damage amounts to 55 billion won, the company said.

Imported cars made up about half of them. But their estimated damage of 30 billion won is nearly double the 18 billion won for local brands.

Overall, imported cars take a 20% share of cars on the roads in South Korea, driven by increasing preference of high-end models such as Mercedes-Benz, BMW and Porsche.

Before the floods, the average loss ratio for non-life insurance firms, or auto insurance payments divided by premiums, hovered at the mid-to-high end of the 70% range in the country.

But their loss ratio is likely to surpass the breakeven point of 80% following the rainfalls.

DB Insurance Co., a leading Korean auto insurer, has received claims for 1,638 damaged vehicles between Monday and Wednesday afternoon. Their estimated damage reached 20.2 billion won, Yonhap said.

The unprecedented heavy rains dampened market expectations of a further cut in auto insurance premiums. The premiums were cut by 1.2-1.4% between April and May on the back of the declining loss ratio as fewer drivers were on the roads during the pandemic period.

South Korea’s leading non-life insurers posted double-digit growth in net profit in the first half of this year. Tightened standards over insurance claims on minor surgeries boosted their bottom line as well.

Write to In-Hyeok Lee at twopeople@hankyung.com
Yeonhee Kim edited this article