The South Korean motor insurance industry is projected to expand at a compound annual growth rate (CAGR) of 4.6% from 2023 to 2028. In terms of gross written premiums (GWP), this translates to an increase from KRW20.5 trillion (US$15.4 billion) in 2023 to KRW25.7 trillion (US$19.2 billion) in 2028, as per data from GlobalData.
GlobalData's figures also indicate that the industry's growth is set to accelerate from 2024, expected to return to pre-pandemic growth rates by 2027. The company noted that the industry saw a modest growth of 2.5% in 2022, with an anticipated slight rise to 3% in 2023. This subdued growth was mainly due to the semiconductor chip shortage and a subsequent increase in car prices, resulting in decreased vehicle sales.
Vehicle sales, however, have shown signs of recovery in 2023 and are expected to bolster further in 2024, positively influencing motor insurance growth. The Korea Automobile and Mobility Association (KAMA) reported that vehicle sales reached 1.34 million units from January to November 2023, marking a 7.0% increase compared to the same period in the previous year. Additionally, car prices have risen by approximately 10% on average, contributing to higher insurance premiums and aiding the sector's expansion.
Conversely, a decrease in motor insurance premium rates, attributed to the stabilization of insurers' loss ratios, is anticipated to moderate this growth over the next two to three years. In 2023, premium rates dropped by 2.5-3% compared to the previous year, driven by reduced claims and improved loss ratios. The loss ratio of motor insurers declined by 0.5% in the first 10 months of 2023.
GlobalData also reported that the transition of motor insurance policy sales from traditional face-to-face channels to digital platforms is contributing to the tempered growth of premiums. The rise of online aggregators and digital distribution of products has intensified competition, leading to more competitive pricing. Smaller insurers, in response, have reduced their policy prices to retain market share, resulting in a lower average premium price.
Emerging trends like usage-based insurance are also gaining traction, leading to a slower premium growth. The increasing consumer preference for convenience and cost-effective insurance products is driving the popularity of online distribution and usage-based motor insurance.
The firm also said that the expected recovery in the economy and rising vehicle sales will support the motor insurance sector's growth from 2024 to 2028. A favourable loss ratio, driven by fewer claims, will aid South Korean motor insurers in re-evaluating their risk exposure and adapting to changing market trends.
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