The motor insurance market in Korea experienced an 11.6% growth in 2020 compared to the previous year as insurers were pressed to raise premium rates in order to keep pace with rising claims costs. The increased number of registered vehicles also led to the expansion in premium income.
There was also an improvement in market profitability, with the loss ratio declining by 6%p year on year to 85% in 2020. The key factor that brought down insurance claims was a significant decrease in driving activity following the COVID-19 outbreak. Although a lockdown was never mandated in Korea, many companies turned to remote working, with people spending most of their time staying at home amid mandatory social distancing measures. This resulted in a drop in car traffic on the roads and less insurance claims activity.
Korean Re also reported an improved loss ratio of 79.2% in 2020 compared to 86.1% in 2019. Our premium income, however, shrank by 11% to KRW 605.4 billion in 2020 due to a decrease in the volume of proportional treaties. The contraction in premiums also reflected market dynamics in which small and medium-sized companies experienced a reduction in market shares because they were forced to reduce their motor business amid continuously high loss ratios and cumulative operating losses.
Domestically, Korean Re maintained existing programs that cover higher risks along with proportional and non-proportional treaties. We also strengthened our business relationships with mutual associations and continued to increase transactions with them by offering various reinsurance solutions.
Across overseas markets, we achieved great success in diversifying our business portfolio by increasing the number of proportional treaties for reliable insurers in the Mediterranean and Eastern European regions. In addition, we signed new contracts with insurers in countries such as the UK, helping to expand our overall book of business.
In 2021, the Korean motor insurance market is expected to grow by 2.9% to over KRW 20 trillion in direct premiums, led by an increasing number of cars and a decreasing share of endorsements offering premium discounts. However, a growing portion of online distribution channels that offer lower rates will put downward pressure on overall premium growth. The loss ratio is forecast to go up when the spread of COVID-19 starts to be kept in check and the use of cars picks up again. Higher auto repair costs may also have an adverse impact on the loss ratio.
Korean Re’s motor business aims to achieve KRW 609.5 billion in gross written premiums in 2021, 0.7% higher than the previous year. To this end, we will further broaden our business relationships with mutual associations to bring business growth and value to our partners as well as to our company. We will also seek cooperation with insurtech startups to seize new business opportunities and enhance our client engagements. Furthermore, we will continue to do our best to build a more profitable and diversified overseas business portfolio as we expand our presence in global markets.
Gross Written Premiums: Motor
(Units: KRW billion, USD million)
|FY 2020 (KRW)||FY 2020 (USD)||FY 2019 (KRW)||FY 2019 (USD)|