South Korean non-life insurers are bracing themselves for a spike in car insurance claims relating to damage from the record downpours that pounded the capital area, sources said Thursday.
Torrential rains have battered Seoul and the surrounding regions since Tuesday, placing thousands of vehicles under water and triggering landslides and flash floods that killed at least 41 people.
The Financial Supervisory Service (FSS) said it had received a total of 5,839 reports on car damages as of Thursday afternoon, and local insurers are expected to pay out an estimated 40.3 billion won (US$38.4 million) in compensation to policyholders.
The amount is more than 14 times larger than the 2.8 billion won insurers paid in compensation during the January-June period.
Industry sources said the non-life insurers' claims payments are feared to rise further as about 400 big-ticket imported Benz, BMW and other luxury cars were submerged in the posh Gangnam area in southern Seoul.
The FSS projected the average loss rate of non-life insurers to gain around 4 percentage points for July. The loss rate measures the amount of money paid in claims from premium income. A higher loss ratio indicates lower profitability for insurers.
Market watchers said hefty compensations on claims are expected to erode profits of non-life insurers, who also suffered sharp losses in their auto insurance businesses last year.
Last year, the car insurance loss ratio of the non-life insurers hit a record high of 80.3 percent, causing them to lose more than 1 trillion won in the car insurance sector. This year, the loss rate firmed up to the 70 percent range. (Yonhap News)
