Credit ratings agency AM Best has maintained its stable outlook on the non-life insurance sector of South Korea, attributed to the improved performance of long-term business and greater stability and auto profitability.
In its latest segment report, the agency said that long-term insurance has maintained its steady growth of approximately 4% in 2022 thanks to the continued expansion of the recurring premium base and great new business figures from health products. Long-term insurance is the largest slice of the non-life business pie in South Korea.
“The cumulative effects of prior rate hikes in the medical indemnity line, along with regulators’ active involvement in controlling moral hazard claims and overtreatment—in particular, cataract surgery—since the first half of 2022 has helped boost carriers’ profits,” AM Best analytics director Chanyoung Lee said in a news release. “Insurers also have been expanding sales of high-margin health products to secure their future profit base under IFRS 17, which became effective in 2023.”
While the auto insurance segment fared a bit worse with subdued premium growth of 2%, the overall combined ratio saw a slight 0.5%-point improvement to 96.9%. AM Best projected upward pressure on the motor insurance segment’s combined ratio following the rebound in claims frequency after the pandemic, plus the rise in vehicle repair costs and minimum wage due to inflation. That said, the agency outlined expanded online sales and regulations for the reduction of traffic accidents as key drivers to help insurers maintain overall profitability.
Elsewhere in the country, DB Insurance has recently bolstered its Southeast Asian expansion with another key acquisition as it acquired Saigon-Hanoi Insurance Corporation (BSH), the ninth-largest property and casualty insurer in Vietnam.
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