Drivers Pay W594,000 Car Insurance Premium on Average

Drivers paid 594,000 won ($626) on average as car insurance premiums rose last year, 4.9 percent up from the previous year. The increase, however, doesn't seem to be offsetting non-life insurers' snowballing losses.

According to the General Insurance Association of Korea (GIAK), car insurance premiums paid in the fiscal year 2006 ending in March this year totaled 9.5 trillion won. Given that the number of registered cars totaled 16.06 million, an average 594,000 won auto insurance premium was levied upon each car. It is 28,000 won more than that the previous year.

Faced with mounting operating losses, insurance companies have taken measures to raise insurance premiums, differentiating premium rates according to car models, and overhauling premium surcharge or discount systems.

Despite the insurance premium increase, insurers are not gaining in profitability. They paid 439,000 won for each car on average, up 3.8 percent from the previous year. The number of payments to subscribers also surged 7.1 percent from a year ago to 7.06 million.

Non-life insurers recorded 833.9 billion won in operating losses, up 62.4 percent from the previous year. Their loss ratio, or the ratio of incurred losses and loss adjustment expenses to earned premiums, averaged 78.3 percent, up 0.7 percentage points from a year ago. Operation expenses, including salaries and marketing expenses, surged 17.1 percent to 6.3 trillion won.

While non-life insurers are suffering from low premiums that are not sophisticatedly differentiated, premiums for life insurance companies are expected to become far more differentiated from October.

According to a number of life insurance companies, most life insurers here plan to reflect the risk ratio based on their own experience when setting insurance premiums. Currently, insurers set premiums based on the data of the Korea Insurance Development Institute.

``The risk ratio is likely to go up as the population in each insurer's statistics is much smaller than that from the Korea Insurance Development Institute. It may lead to an insurance premiums hike,'' a spokesperson of a life insurance company explained.