Auto Insurance Underwriting Profit Turns to Deficit in First Half for First Time in Six Years

Sales Increase Offset by Sharp Rise in Claims, Especially Hospital Treatment Costs
Combined Ratio at 101.9%, Exceeding the 100% Breakeven Point
FSS: "Loss Ratio Expected to Improve Through Implementation of the Eight-Week Rule"

This year, the auto insurance underwriting balance turned to a deficit for the first time in six years in the first half of the year. This was mainly due to a rise in the loss ratio and an increase in hospital treatment costs, which significantly deteriorated underwriting profitability.

According to the 'Provisional 2026 First-Half Performance of Auto Insurance Business,' announced by the Financial Supervisory Service on the 15th, auto insurance premiums in the first half amounted to 10.6384 trillion won, up 4.2% from 10.2115 trillion won in the same period a year earlier. This was attributed to an increase in the number of auto insurance policies and the approximately 1.3% average premium hike by insurance companies at the beginning of the year.

The overall auto insurance net profit stood at 238 billion won, down 37.7% from 382 billion won a year earlier. Notably, the underwriting balance recorded a loss of 184.8 billion won, marking a return to deficit for the first time in six years since the first half of 2020. The combined ratio (the sum of the loss ratio and the expense ratio, calculated as net expenses earned premium/earned premium) reached 101.9%, surpassing the break-even point of 100%. A higher combined ratio indicates lower profitability from insurance operations for insurers. The expense ratio was 17.0%, up 0.6 percentage points from 16.4% a year before, while the loss ratio also increased by 1.6 percentage points to 84.9% from 83.3% in the previous year.

The combined ratio surpassed the break-even point because, despite increased sales and earned premiums, the rise in claims expenses was larger due to growing personal injury payouts—mainly hospital treatment costs—and higher material compensation such as automotive repair charges.

However, investment gains reached 422.8 billion won, up 20.2% year-on-year. As a result, despite the underwriting deficit, the overall net profit of the auto insurance sector remained positive.

The market share of major insurers (Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance) was 84.8%, down 0.2 percentage points from the end of last year. The market share of mid- and small-sized insurers (Hanwha General Insurance, Meritz Fire & Marine Insurance, Lotte Insurance, Yebyeol General Insurance, and Heungkuk Fire & Marine Insurance) climbed by 1.6 percentage points to 11.0%. The share of direct insurance specialists (AXA Direct, Hana Insurance, and Carrot General Insurance) fell by 1.4 percentage points to 4.2%.

The Financial Supervisory Service expects that the recently introduced so-called "eight-week rule," implemented on September 10 for auto accidents occurring thereafter, will help improve the auto insurance loss ratio going forward. The eight-week rule requires minor injury claimants (injury grades 12 to 14) in auto accidents who seek treatment for more than eight weeks after the accident to submit documentation proving the necessity of continued treatment—including diagnosis certificates and medical records—within seven weeks of the accident date and undergo a review by a medical professional.

The Financial Supervisory Service plans to reduce insurance payout leakage and improve the auto insurance loss ratio by adopting the eight-week rule and restructuring the criteria for future treatment cost payments for minor injury cases. If these measures yield improvements in the loss ratio, the authority sees greater room for reducing auto insurance premiums. An official from the Financial Supervisory Service stated, "We will work with related agencies to ensure that well-intentioned consumers are not inconvenienced by the implementation of measures for minor injury auto insurance claimants," adding, "We will oversee the process so that the improvements in the loss ratio brought by regulatory changes ultimately lead to lower auto insurance premiums nationwide."

This content was produced with the assistance of AI translation services.