Twelve years have passed since Fact Book was first published in 2003. The Korea Insurance Development Institute (KIDI) believes Fact Book has successfully introduced trends and changes in the Korean automobile insurance industry to our readers across the globe. I am deeply honored to announce the publication of this year's Fact Book, with the hope that it will continue to shed light on the Korean automobile insurance market.
In Korea, automobile insurance is considered one of the core business lines in the non-life (general) insurance sector, accounting for 17.5 percent of the entire non-life market.
The size of automobile insurance totalled approximately KRW 12.2 trillion (USD 11.1 billion) in written premium. Specifically, vehicle registration grew by 2.8 percent in 2013. However, written premium of automobile insurance decreased by 0.4 percent from the previous year, due to the increase of discount products in the automobile insurance.
In the mean time, the loss ratio of automobile insurance was 86.8 percent in 2013, a slight deterioration compared to 2012, despite insurances companies and government's efforts to reduce car accidents and stabilize the loss ratio.
Meanwhile, market competition became intensified in 2013. The market share of on-line direct insurers jumped to 29.2 percent, an increase from 27.0 percent of the previous year.
Fact Book 2013 contains various statistics that show current situation of the automobile insurance in Korea. We are confident this Fact book will provide you with a comprehensive understanding on the Korean automobile insurance market. KIDI always strives to provide specialized and professional service for insurers, customers, and supervisory authorities in Korea, and ultimately to become a responsible member of the global insurance industry.
Kim, Soo-Bong Chairman & CEO Korea Insurance Development Institute
ⓒ Korea Insurance Development Institute (Published September 2014)
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers and copyright owners.
Chapter 1 : The Korean Insurance Industry ···1
Chapter 2 : The Non-Life Insurance Market ···6
1. Written Premium and Incurred Losses by Line of Business ···6
2. Non-Life Insurance Expenses by Line of Business ···9
Chapter 3 : The Korean Automobile Insurance Market ···11
1. Number of Registered Vehicles ···11
2. Written Premium and Incurred Losses by Line of Automobile Insurance ···· 12
3. Accident Statistics ···14
3-1. General Accident ···14
3-2. Insurance Accident by Coverage ···16
4. Expenses and Expense Ratio ···17
5. Underwriting Results ···18
6. Residual Market ···19
7. Acts Related with Automobile Insurance ···20
7-1. Guarantee of Automobile Accident Compensation Act ···20
7-2. Act on Special Cases concerning the Settlement of Traffic Accidents ···21
7-3. Insurance Business Act ···21
7-4. Automobile Insurance Plan(AIP) ···22
8. Ratemaking System ···24
8-1. Ratemaking ···24
8-2. Improvement in Ratemaking System ···25
Appendix I. Korea`s Automobile Insurance ···31
Appendix II. Glossaries ···32
Appendix III. Special Clauses ···35
Appendix IV. KIDI's Brief History & Members ···36
GDP and Insurance Industry Growth Rate, 2009-2013
Chapter 1 : The Korean Insurance Industry
In 2013, the Korean insurance industry reported a 2.4 percent increase in growth rate of written premium while GDP grew by 3.0 percent. Behind such decline of insurance growth rate was the amendment to the income tax law, which resulted in reducing tax benefits provided to saving insurance. Lower demand for saving insurance has brought about low growth in insurance compared to the previous year.
GDP and Insurance Industry Growth Rate
Percent 2009 2010 2011 2012 2013 GDP 0.7 6.5 3.7 2.3 3.0 Life1 1.4 7.3 7.1 23.6 1.3 Non-Life2 14.7 19.9 15.8 17.0 4.1 Insurance 5.7 11.7 10.4 21.0 2.4
Notes : 1Written premium in life Insurance, 2Written premium in non-life insurance Sources : KIDI, Monthly Insurance Statistics
The life insurance premium to GDP ratio was around 6.5 percent until 2011 and then increased to 7.6 percent in 2013, while non-life insurance premium to GDP ratio increased until 2012. In 2013, non-life insurance premium to GDP ratio was equal to that in 2012, affected by the amendment to the income tax law. Premiums as a percentage of GDP Percent 2009 2010 2011 2012 2013 Life 6.6 6.4 6.5 7.8 7.6 Non-Life 3.6 3.9 4.3 4.9 4.9 Total 10.1 10.3 10.8 12.6 12.5
Source : KIDI, Monthly Insurance Statistics
Bank of Korea - Main Annual Indicators (reference year 2010, 2000~)
In 2013, premium per capita (insurance density) was 3,551 thousand won, an increase by 2 percent compared to the previous year and about 1.5 times higher than that in 2009. The insurance density of life insurance and non-life insurance were 2,162 thousand won and 1,390 thousand won, respectively. For the last five years, life insurance has increased 1.4 times, while non-life insurance has increased 1.7 times.
Premiums Per Capita
2009 2010 2011 2012 2013
Life 1,534 1,638 1,741 2,142 2,162
Non-Life 839 1,001 1,151 1,340 1,390
Total 2,373 2,639 2,892 3,483 3,551
Note : Estimated population by Korea National Statistical Office Source : KIDI, Monthly Insurance Statistics
In 2013, life insurance and non-life insurance in written premium grew 1.3 percent and 4.1 percent from the previous year, respectively. The increase in written premium has slowed due to the income tax amendment in 2013.
Written Premium Billion won 2009 2010 2011 2012 2013 Life 75,447 80,939 86,657 107,127 108,559 Non-Life 41,263 49,478 57,296 67,012 69,784 Total 116,710 130,417 143,953 174,139 178,343
Written Premium of Life & Non-Life Insurance (2013)
•In 2013, shares of written premium for life and non-life insurance were 60.9 percent and 39.1 percent, respectively.
Total Asset of Life & Non-Life Insurance (2013)
•In 2013, shares of total asset size of life and non-life insurance were 77.8 percent and 22.2 percent, respectively.
The total asset size of insurance has grown by 14.4 percent per annum for the past five years. In 2013, it recorded 768 trillion won, of which life and non-life each accounted for 597 trillion won and 171 trillion won, respectively.
Total Asset Trillion won, % 2009 2010 2011 2012 2013 Life (12.8)361 (13)408 (8.6)443 (23.7)548 (8.9)597 Non-Life 83 99 123 152 171 (15.3) (19.3) (24.2) (23.6) (12.5) Total (13.3)444 (14.2)507 (11.6)566 (23.7)700 (9.7)768
Note : Figures in the parentheses indicate annual growth rate
Source : General Insurance Association Of Korea, Monthly Insurance Statistics L i f e Inasurance Association Of Korea, Monthly Insurance Statistics
Life Insurance Non-Life Insurance Auto Non-Auto Hanwha
Life Insurance Co., Ltd. Meritz Fire & Marine Insurnace Co., Ltd. ○ ○ Samsung
Life Insurance Co., Ltd. Hanwha Non-life Insurance Co., Ltd. ○ ○ Heungkuk
LIfe Insurance Co., Ltd. Lotte Non-llife Insurance Co., Ltd. ○ ○ Kyobo
Life Insurance Co., Ltd. MG Non-life Insurance Co., Ltd. ○ ○ Hyundai Life Co., Ltd. Heungkuk Fire & Marine Insurance Co., Ltd. ○ ○
Life Insurance Co., Ltd.
Fire & Marine Insurance Co., Ltd. ○ ○ WOORIAVIVA
Life Insurance Co., Ltd. Hyundai Marine & Fire Insurance Co., Ltd. ○ ○ KDB
Life Insurance Ltd. LIG Insurance Co., Ltd. ○ ○
Life Insurance Co., Ltd. Dongbu Insurance Co., Ltd. ○ ○ KB
Life Insurance Ltd. Seoul Guarantee Insurance Company × ○ Dongbu
Life Insurance Co., Ltd. Korean Re Insurance Company × ○ Dongyang
Life Insurance Co., Ltd. American Insurance Group, Inc. ○ ○ ING
Life Insurance Ltd.
ACE American Fire & Marine Insurance
Company Korea × ○
BNP PARIBAS CARDIF
Life Insurance FEDERAL Insurance Company Korea × ○ The Prudential
Life Insurance Company
First American Title Company
Korea Branch × ○
Life Insurance Co., Ltd. Mitsui Sumitomo Insurance Co., Ltd. × ○ Alianz
Life Insurance Co., Ltd. AXA Genral Incurance Co., Ltd. ○ ○ MetLife
Insurance Company of The-K Non-life Insurance Co., Ltd. ○ ○ There are 25 life insurance companies and 31 non-life insurance companies in Korea. 17 out of 31 non-life insurance companies are not involved in the automobile insurance business (the majority of them are reinsurers).
LIfe Insurance Co., Ltd.
ERGO Daum Direct
General Insurance Co., Ltd. ○ ○ ACE
Life Insurance Ltd.
Hyundai Hicardirect Auto Insurance
Co.,Ltd. ○ ○
Life Insurance Co., Ltd. DAS Legal Expenses Insurance Co., Ltd. × ○ American International
Property & Casualty Insurance Co., Ltd. × ○ IBK Pension Insurance General Re Insurance Company Korea × ○
Life Insurance Co., Ltd Swiss Re Insurance Company Korea × ○ Kyobo Lifeplanet Insurance
Company Munich Re Insurance Company Korea × ○ Tokio Marine & Nichido Fire Insurance
Co., Ltd. × ○
SCOR Re Insurance Company Korea × ○ RGA Re Insurance Company Korea × ○ Hannover Re Insurance Company Korea × ○
AIG United Guanranty Insurance Co.,
Ltd. Korea Branch × ○
Genworth Financial, Inc. Korea Branch × ○
1. ○ → In business, × → Not in business
2. New York Life Co. was renamed ACE Life Korea in February, 2011 3. Greencross Life Co. was renamed Hyundailife Life Co. in February, 2012 4. Korea Life Co. was renamed Hanwha Life Co. in October, 2012
5. Green Non-life Insurance Co. was renamed MG Non-life Insurance Co. in May, 2013 6. Kyobo Lifeplanet Insurance Company established in Sep, 2013
The number of employees and solicitors hired by life insurance companies is not much different from the number of those hired by non-life insurance. However, life insurance has 1.4 times more branch offices than non-life insurance has, while non-life insurance has 5.3 times more agencies compared to life insurance.
Employee and Distribution Channel by Insurance Business
Branch Offices Employees Solicitors Agencies
Life 4,402 30,380 143,228 7,035
Non-Life 3,251 33,479 164,253 36,952
Note : Number of dependent sales agents on the basis of registration Source : Financial Supervisory Service(FSS), Financial Statistics
Chapter 2 : Non-Life Insurance Market
1. Written Premium and Incurred Loss by Line of Business
In the non-life insurance market, total written premium has grown from 41,249 billion won in 2009 to 69,725 billion won in 2013. Despite decrease of savings portion in long-term insurance and discounts to premium in automobile insurance, the share of written premium for automobile and long-term insurance has reached 83.6 percent in 2013.
Written Premium By Line of Business
Automobile % Long-term % Guarantee % Marine % Fire % Others % Total 2009 10,528 0.0 23,522 21.1 1,050 9.0 788 -2.7 277 -3.5 5,084 27.6 41,249 2010 11,453 8.8 29,297 24.6 1,089 3.7 789 0.1 265 -4.3 6,563 29.1 49,456 2011 12,369 8.0 34,942 19.3 1,259 15.6 803 1.8 261 -1.5 7,639 16.4 57,273 2012 12,277 -0.7 43,665 25.0 1,371 8.9 894 11.3 316 21.1 8,435 10.4 66,958
2013 12,223 -0.4 46,082 5.5 1,285 -6.3 744 -16.8 318 0.6 9,073 7.6 69,725 Notes : 1. Annuity is included in long-term insurance.
2. Others include casualty, personal accident, retirement insurance, etc. 3. % is annual change.
Source : KIDI, Monthly Insurance Statistics, Monthly Auto Insurance Statistics(Automobile)
•In 2013, written premium amount in long-term insurance reached 46.1 trillion won, which accounted for 66.1 percent of the non-life insurance market.
•Automobile insurance came second with 12.2 trillion won (17.5%), followed by Guarantee insurance with 1.8 percent and Marine with 1.1 percent.
In 2013, long-term insurance and automobile insurance recorded high loss ratio of 85.9 percent and 86.8 percent, respectively, while Marine and Fire insurance showed relatively low incurred loss ratio of 63.0 percent and 39.2 percent, respectively. Loss ratio of Marine and Fire insurance showed big fluctuations during the past five years, and that of Automobile, Long-term and Guarantee insurance increased gradually for the same period.
Billion won, % Billion won, %
EP1 IL2 L/R 2009 10,420 7,973 76.5 2010 10,896 9,581 87.9 2011 12,004 10,009 83.4 2012 12,350 10,329 83.6 2013 12,182 10,574 86.8 EP1 IL2 L/R 2009 23,255 18,872 81.2 2010 29,038 24,235 83.5 2011 34,915 29,422 84.3 2012 43,419 37,397 86.1 2013 45,601 39,180 85.9 Guarantee Marine
Billion won, % Billion won, %
EP1 IL2 L/R 2009 970 458 47.2 2010 1,001 220 22.0 2011 1,030 482 46.8 2012 1,141 696 61.0 2013 1,206 911 75.5 EP1 IL2 L/R 2009 418 586 140.1 2010 328 238 72.6 2011 374 243 64.9 2012 363 208 57.3 2013 345 218 63.0 Fire Others
Billion won, % Billion won, %
EP1 IL2 L/R 2009 246 99 40.4 2010 173 22 12.5 2011 174 125 72.3 2012 270 163 60.3 2013 269 105 39.2 EP1 IL2 L/R 2009 4,063 2,667 65.6 2010 4,498 3,023 67.2 2011 4,915 3,377 68.7 2012 5,482 3,920 71.5 2013 6,204 4,211 67.9 Note : 1Earned Premium, 2Incurred Losses
Annuity / Retirement insurance is included in Long-term insurance Source : FSS, Financial Statistics, Monthly Auto Insurance Statistics(Automobile)
The "Big Four" companies (Samsung, Hyundai, Dongbu, and LIG) accounted for roughly 70.2 percent of the total written premium in the non-life insurance market. In 2013, Samsung F&M had the largest share, 25.7 percent, followed by Hyundai M&F with 16.3 percent, Dongbu F&M Insurance with 14.7 percent, and LIG insurance with 13.5 percent.
Written Premium and Market Share by Non-Life Insurance Company, 2013
Company Written Premium Share(%)
Samsung 17,916 25.7 Hyundai 11,355 16.3 Dongbu 10,269 14.7 LIG 9,433 13.5 Meritz 4,879 7.0 Hanwha 4,118 5.9 Heungkuk 2,959 4.2 Lotte 2,644 3.8 Nonghyup 2,166 3.1 SGIC 1,277 1.8 AXA 657 0.9 MG 612 0.9 AIG 498 0.7 Hicardirect 401 0.6 The-K 308 0.4 Others 291 0.4 Total 69,784 100.0
Note : 1.Others include ERGO Daum, Ace American, First American, FEDERAL, Mitsui Sumitomo, Korean Re 2.Ceded and assumed premium are excluded in Written premium
Source : KIDI, Monthly Insurance Statistics
2013 Written Premium by Insurance Company
Note : Others include ERGO Daum, Ace American, First American, FEDERAL, Mitsui Sumitomo, Korean Re, MG, AIG, SGIC, The-K, Hyundai Hicar Direct
2. Non-Life Insurance Expense by Line of Business
In 2013, as shown in the table below, expenses incurred by all insurance lines except Automobile insurance have increased. Growth rates of the expenses by Long-term and Marine insurance showed a considerable increase, which was higher than eight percent compared to the previous year.
Expenses by Line of Business
Billion won Automobile % Long-term % Guarantee % Marine % Fire % Others % Total
2009 2,911 0.1 4,859 32.5 182 6.3 113 -2.3 100 -8.0 1,026 4.1 9,191 2010 3,184 9.4 4,883 0.5 167 -8.3 99 -12.4 67 -33.1 1,080 5.2 9,479 2011 2,733 -14.2 5,755 17.8 126 -24.6 114 16.0 111 66.0 1,129 4.5 9,968 2012 2,632 -3.7 7,318 27.2 250 99.0 121 5.6 134 20.6 1,352 19.8 11,807
2013 2,532 -3.8 8,241 12.6 255 2.0 131 8.2 138 2.9 1,533 13.3 12,829
Notes : 1. Long-term insurance included Annuity 2. % is annual growth change
3 Claim survey fee is excluded in operating expenses in accordance with IFRS basis Source : FSS, Financial Statistics
Among non-life insurances, Automobile, Long-term and Marine showed a deficit for 2013, while Guarantee and Fire insurance recorded a surplus. Automobile and Long-term insurance have underperformed for the recent five years.
Underwriting Results by Line of Business
Notes : 1
Automobile % Long-term % Guarantee % Marine % Fire % Others % Total
2009 -474 -266.2 -615 -38.3 294 4.4 -290 -1,746.0 40 -5.2 306 150.0 -737 2010 -1,459 -208.1 -265 56.9 577 96.2 -19 93.5 79 97.0 310 1.4 -776 2011 -574 60.7 -319 -20.6 383 -33.7 15 179.1 -64 -180. 8 389 25.5 -170 2012 -564 1.8 -1,296 -306. 3 195 -49.1 34 131.1 -27 58.6 209 -46.2 -1,448 2013 -949 -68.3 -1,820 -40.4 40 -79.6 -3 -108.5 26 197.4 460 119.7 -2,246 . Long-term insurance includes Annuity.
2. Underwriting results(Operating income) = earned premium - incurred losses - net expenses 3. % is annual growth rate
Source : FSS, Financial Statistics, KIDI, Automobile Insurance Yearbook
Chapter 3 : The Korean Automobile Insurance Market
1. Number of Registered Vehicles
The number of vehicle registration has constantly increased for the five years, having grown by 2.8 percent, including 2.6 percent in private and 7.0 percent in commercial vehicles compared to the previous year. Because of the economic uncertainty, growth of registered vehicles had declined in 2011 and 2012, but since 2013, it has increased as the economic environment emerged from recession.
Number of Registered Vehicles
Thousand, % 2009 2010 2011 2012 2013 Private Vehicle 16,395 16,967 17,426 17,818 18,275 3.2 3.5 2.7 2.2 2.6 Commercial Vehicle 930 974 1,011 1,052 1,126 2.1 4.7 3.8 4.1 7.0 Total 17,325 17,941 18,437 18,871 19,401 3.2 3.6 2.8 2.4 2.8
Notes : 1. Figures in each second raw of the vehicles indicate annual growth change. 2. Motorcycles and trailers excluded.
Source : Ministry Of Construction and Transportation(MOCT)
As shown in the pie chart below, private vehicles had the largest share with 77.8 percent in 2013, followed by trucks with 16.9 percent, and buses with 5.0 percent.
Trends in number of registered vehicles 2013 Types of Vehicles
Note : Motorcycles and trailers excluded.
2. Written Premium and Incurred Losses by Line of Automobile Insurance
The size of written premium in private automobile insurance has shrunk since 2011 and recorded 7,820 billion won in 2013. The loss ratio in private automobile insurance increased by 78.2 percent, which was the second highest record for the five years.
Billion won, % WP and L/R of Private Auto Insurance Private Automobile Insurance
PremiumPremiumEarned IncurredLosses RatioLoss 2009 6,752 6,664 5,017 75.3 2010 7,424 7,019 5,839 83.2 2011 8,020 7,790 5,947 76.3 2012 7,887 7,951 5,955 74.9
2013 7,820 7,807 6,102 78.2
Note : Loss Adjustment Expenses excluded Source : KIDI, Monthly Automobile Statistics
Written premium in business automobiles had steadily increased until 2011, yet since 2011 it has decreased again. The loss ratio increased from 69.6 percent in 2009 to 75.9 percent in 2013.
Billion won, % WP and L/R of Business Auto Insurance Business Automobile Insurance
PremiumPremiumEarned IncurredLosses RatioLoss 2009 2,586 2,586 1,800 69.6 2010 2,769 2,657 2,068 77.8 2011 2,962 2,888 2,114 73.2 2012 2,928 2,952 2,191 74.2
2013 2,920 2,914 2,211 75.9
Note : Loss Adjustment Expenses excluded Source : KIDI, Monthly Automobile Statistics
Wwritten premium in commercial automobile insurance recorded 823 billion won in 2013 and grew by 2.9 percent, compared with 800 billion won in 2012.
The loss ratio was 87.5 percent, signifying a deterioration compared with 2012.
Billion won, % WP and L/R of Commercial Auto Insurance Commercial Automobile Insurance
PremiumPremiumEarned IncurredLosses RatioLoss
2009 670 662 497 75.2
2010 722 693 569 82.1
2011 776 753 604 80.2
2012 800 800 663 83.0
2013 823 803 703 87.5
Note : Loss Adjustment Expenses excluded Source : KIDI, Monthly Automobile Statistics
Written premium in Motorcycle insurance recorded 136 billion, and loss ratio of Motorcycle insurance increased in 2013 after showing a constant decrease until 2012.
Billion won, % WP and L/R of Motorcycle Insurance Motorcycle Insurance
PremiumPremiumEarned IncurredLosses RatioLoss
2009 119 115 90 78.1
2010 118 118 90 76.3
2011 121 119 87 72.9
2012 148 138 96 69.4
2013 136 140 106 75.7
Note : Loss Adjustment Expenses excluded Source : KIDI, Monthly Automobile Statistics
Written Premium by Line of Automobile insurance
•Private automobile insurance, making up for 66.8 percent, had the largest share of written premium, followed by business automobile insurance with 25.0 percent, commercial automobile insurance with 7.0 percent, and motorcycle insurance with 1.2 percent.
3. Accident Statistics
3-1. General Accident
From 2009 to 2013, the number of car accidents has decreased with certain fluctuations, while the number of registered vehicles has increased for the same period. As a result, the accident ratio dropped from 1.3 percent in 2009 to 1.1 percent in 2013.
Accident Number and Accident Ratio
Accidents Annualchange AccidentRatio Registered VehiclesNumber of Annualchange
2009 231,990 7.5 1.3 17,325,210 3.2
2010 226,878 -2.2 1.3 17,941,356 3.6
2011 221,711 -2.3 1.2 18,437,373 2.8
2012 223,656 0.9 1.2 18,870,533 2.3
2013 215,354 -3.7 1.1 19,400,864 2.8
Notes : 1. Annual change is the growth rate compared to the previous year 2. Motorcycles are excluded from the number of registered vehicles 3. The number of vehicles registered are as at the end of the year. Source : National Police Agency(NPA), Traffic Accident Statistics
Trends in Number of Accident and Accident Ratio
The number of accidents per 10,000 registered vehicles has shown a decrease from 2009 to 2013 with some fluctuations. In 2013 the rate of change was -6.1 percent.
Accident Number per 10,000 registered vehicles
Case, % 2009 2010 2011 2012 2013 # of Accidents (4.7)111 (-4.5)106 (-4.7)101 99 (-2.0) 93 (-6.1) Notes : 1. Figures in the parentheses indicate annual growth rate
2. Motorcycles are included
3. Construction machinery and farm Machinery are included since 2005 Source : NPA, Traffic Accident Statistics
The number of deaths by traffic accident was 5,092 in 2013. And the number of injuries was 328,711, showing a slight decrease compared with 2012. Fatalities per 100,000 population have continued to fall from 11.5 persons in 2009 to 9.8 persons in 2013. Although there have been some fluctuations, as a whole the number of injuries per 100,000 population have declined.
Number of Deaths and Injuries
Deaths Number ofInjuries
2009 5,838 361,875
2010 5,505 352,458
2011 5,229 341,391
2012 5,392 344,565
2013 5,092 328,711 Source : NPA, Traffic Accident Statistics
Number of Deaths and Injuries per 100,000 Population
Deaths Number ofInjuries
2009 11.5 714.5
2010 10.7 685.3
2011 10.1 660.1
2012 10.4 664.1
2013 9.8 630.6
3-2. Insurance Accident by Coverage
The Car Year, accident number in Bodily Injury I (BI I) have increased since 2009. BI I Accident ratio was around 6 percent and the Car Year has increased by 15.0 percent, with car accidents increasing by 11.4 percent for the past five years. The accident rate in Bodily Injury II has increased gradually since 2009. The accident ratio of Property Damage and Car Year have continuously soared for the five years with some fluctuations. Car year increased by 15.1 percent for the five years while accident number increased by 29.3 during the same period.
Both accident number and earned Car Year of Expanded Medical Payments have gradually risen from 2009 to 2013 with some fluctuations, and the accident ratio of expanded medical payments have stayed constant.
The accident ratio of physical damage in 2013 recorded 15.7 percent. The number of accidents has decreased by 11.7 percent compared with 2009. Such downward trend in accident number since 2010 was due to the introduction of coinsurance policy in physical damage insurance.
The accident number of uninsured motorists showed an increasing trend for the five years, reaching its highest in 2013. The accident ratio of uninsured motorists was 0.1 percent, recording the same level during the five years.
Accident Ratio by Coverage
% Bodily Inhuty Ⅰ Bodily Inhuty Ⅱ Property Damage Expanded Medical Payments Physical Damage Uninsured Motrorist 2009 6.1 1.3 14.3 0.6 22.5 0.1 2010 6.3 1.6 15.6 0.7 25.0 0.1 2011 5.9 1.6 15.1 0.6 21.8 0.1 2012 6.1 1.7 15.7 0.7 16.1 0.1 2013 5.9 2.0 16.1 0.7 15.7 0.1
Expenses and Expense Ratio in Automobile Insurance
4. Expenses and Expense Ratio
Operating Expenses recorded 2,532 billion won and expense ratio was 21.0 percent in 2013, showing a continuous decrease since 2010.
Trends in Expenses and Expense Ratio
Billion won, %
2009 2010 2011 2012 2013
Operating Expenses 2,911 3,184 2,733 2,632 2,532
Expense Ratio 27.8 27.8 22.2 21.5 21.0
Note : Claim survey fee is excluded in Operating Expenses in accordance with IFRS basis Source : FSS, Monthly Financial Statistics
Trends in Underwriting Results of Automobile Insurance
5. Underwriting Results
In 2010, underwriting results of automobile insurance reached -1,459 billion won, which was the lowest figure for the five years. In 2011 and 2012, such results improved due to the change in the rate making system. However, the underwriting results got worse again in 2013.
Trends in Underwriting Results
Billion won, %
Underwriting Results Annual % change •Underwriting results have usually been in negative figures, and the fluctuations in annual underwriting results have been wide and irregular. •As seen from the left table, in 2013
the result worsened compared to 2012. 2009 -474 -266.2 2010 -1,459 -208.4 2011 -574 60.7 2012 -564 1.8 2013 -948 -68.3
Note : Annual % change is the growth rate compared to the previous year. Source : FSS, Monthly Financial Statistics
Trends in Weitten Premium, L/R of Residual Market
6. Residual Market
The residual market continues to provide coverage for those who cannot purchase insurance in the regular market. Although there were some fluctuations, all of written premium and earned premium in the residual market have shown a decreasing trend. Loss ratio of the residual market in 2013 recorded 87.6 percent.
Residual Market : Written Premium, Earned Premium, Incurred Losses, Loss Ratio
Written Premium Earned Premium Incurred Losses Loss Ratio(%)
2009 45 56 42 74.3
2010 40 40 38 95.6
2011 47 45 38 83.3
2012 27 36 31 85.1
2013 22 22 20 87.6
7. Acts Related with Automobile Insurance
7-1. Guarantee of Automobile Accident Compensation Act
o The Guarantee of Automobile Accident Compensation Act(law no. 1314) was enacted in April 1963 to minimize social problems arising from motor vehicle accidents.
o The law provides that if a person who, for his own benefit, places an automobile in operational use injures the life or body of another, he or she is bound to compensate victim(s) for the damage resulted from the operation of the vehicle. To ensure this, the law provides that no one is to operate a motor vehicle unless it is covered by Bodily Injury Liability Coverage I which is compulsory automobile liability insurance.
o Guarantee of Automobile Accident Compensation Act has adopted the liability without fault. The burden of proof does not lie with the injured person whether or not the damage is caused by injurer`s willful act or fault. To protect the injured person by uninsured vehicles, unregistered vehicles, and hit-and-run vehicles, the Government Insurance Assessment Plan provides indemnification up to the same amount as does the Compulsory Automobile Liability Insurance.
o On Feb. 22, 2005, Insuring Coverage for Property Damage became compulsory and limit of liability of Bodily Injury was raised.
Bodily Injury Liability Coverage
(1st Degree) 80 mil. won → 100 mil. won Injury(1st Degree) 15 mil. won → 20 mil. won Property Damage
Obligated to insure his/her property for 10 million won of indemnity
* There are standards for grading Injury and Permanent Disability, respectively. The standards have 14 levels of injury and permanent disability categories for each one.
7-2. Act on Special Cases concerning the Settlement of Traffic
o In view of the fact that motor vehicles became essential in people`s lives, the Act on Special Cases concerning the Settlement of Traffic Accidents(law no.3490) was enacted on Dec. 31, 1981 for the purpose of rapid recovery for the damage caused by a car accident and increasing benefits of the public. o According to the Act, a victim cannot file a law suit with the court in
accordance with Article 4 of the Act as long as a person insures him/herself for all amounts the victim can fully be compensated. In other words, the person must insure him/herself for Bodily Injury Liability Coverage I, Bodily Injury Liability Coverage II that can indemnify the victim for unlimited amount of liability. But there are exceptions for this. They are death of the victim, hit-and-run accident, and ten cases of severe violation of traffic law; traffic light violation, crossing the center line, speed limit violation, violation of overtaking prohibition, violation of traveling in intersection, violation of pedestrian protection, unlicensed driving, drunk driving, encroaching upon the sidewalk, starting a vehicle with the door open (violation of passenger protection)
o On Dec. 22, 2009, the Act was amended. There was an addition to exceptions for indemnification, and; it is called "School Zone Accident". A driver who causes an injury to a child at the zone of Child Protection(School-zone) can not be indemnified for his/her behavior.
7-3. Insurance Business Act
o The purpose of this Act is to guide and supervise the insurance business, efficiently protect the rights and interests of the policyholder, the insured and other interested persons concerned and thus to contribute to the sound development of the insurance business and the balanced growth of the national economy.
o Paid-in capital raised (Life Insurance : 0.2 billion won → 10 billion won, Non-life Insurance : 0.3 billion won → 30 billion won) and Insurance Guarantee Fund established on Dec. 31, 1988
o Qualification of shareholder limited in order to actively cope with the trend in globalization and to strengthen competitiveness in the financial industry, and paid-in capital raised to 30 billion won from 10 billion won on Aug. 28, 1997.
o In the past, the Advisory Organization (KIDI) made premiums by adding pure premium to loading. On Feb. 5, 1999, the Act was amended. Since, the Advisory Organization (KIDI) has provided only pure premiums, the insurers have set their own loadings.
o On Jan. 21, 2000, the Act provided that an insurance company, managing a certain insurance sector of the insurance businesses, could select a different paid-in or foundation fund over the scope of 10 billion won.
o On May 29, 2003, the Act provided that paid-in capital of tele-marketing insurance companies was set at two thirds of that of other general insurance companies.
o On Sep 1, 2008, the soliciters are permitted cross-selling of insurance under a new sales scheme. It allowed non-life insurers to sell life insurance products and life insurers to sell property and casualty insurance schemes.
7-4. Automobile Insurance Plan(AIP)
o Comprehensive automobile insurance is voluntary so that the insurers can select whether or not to underwrite a policy, based on their underwriting policies and procedures. (Insurance companies normally evade those who have excessively high loss ratios.)
o However, this caused social problems. Underwriting policies of insurance companies were against the publicity of the automobile insurance to protect the bona-fide third party.
o Accordingly, non-life insurance companies concluded an agreement, 「Agreement of Joint Underwriting」, to provide automobile insurance coverage to those who are unable to obtain coverage in the voluntary market and to protect the victim. This plan became effective on April 24, 1987.
o As the number of people who are unable to obtain coverage in the voluntary market had rapidly increased, the Detailed Operational Directives for the Implementation of Agreement of Joint Underwriting were made on Feb. 10, 1995. From May 1, 1995. Their distribution was automatically conducted by KIDI`s computer network.
o In a view of the application of premiums, KIDI has made premiums for the residual market that are added extra percentage points compared to other premiums in the voluntary market, considering the risk of accident and the features of joint underwriting.
8. Ratemaking System
o The Applied premium of automobile insurance is calculated by the base premium and various rates that depend on characteristics of the automobile and the insured. Base premium is determined by usage, type of automobile, coverage and the limit of liability for each coverage. In addition, there are many kinds of rates considered to calculate the insurance price; merit-demerit rate, insured characteristic rate, rate on particular contract and special rate etc. The applied premium is calculated as follows.
Applied premium ＝ Base premium × Insured characteristic rate × Merit-Demerit rate × Special rate × Other rates
o Merit-demerit rate is applied to fleet risk and non-fleet risk respectively. This rate is determined by accident records and loss records of the insured. The rate starts from 100% and ranges from 200% (surcharge) to 30% (discount). o Insured characteristic rates reflect previous auto insurance records and traffic
violation records. Rate by previous auto insurance experience is the highest for a beginner. Rate by traffic violation is determined by traffic violation records of the insured during the valuation period. Surcharge rates applied to each traffic violation type which is as follows.
Group Traffic Violation Type Rate
1. Unlicensed Driving
2. Leaving Scene of Accident
20% 20% 3-1. Driving under the influence (1 times)
3-2. Driving under the influence (more than 2 times)
4-1. Traffic light violation, Failing to Yield Right of Way, Speeding over posted limit (2 ～ 3 times)
4-2. Traffic light violation, Failing to Yield Right of Way, Speeding ver posted limit (more than 4 times)
o Rate on a particular contract reflects coverage characteristics such as who is qualified to drive or who will drive. When the policy excludes drivers under the age of twenty-one or twenty-six, lower premium will be applied. Furthermore when drivers are limited to named insured and relatives, the premium will be discounted. Especially special clauses for a family or a married couple are usually selected.
o Special rate applies to the special risk which has different automobile safety devices or different characteristics based on use or type of car. For example, there are rate for cars equipped with ABS, sports and sports-type cars and so on.
8-2. Improvement in Ratemaking System
o The improved Bonus-malus system has been applied since January, 2007. The period that merit-demerit rate reaches to the highest(200%), and the lowest(40%) is liberalized to each company according to the risk of the insured. And safeguards like Guard grade system on long non-accident are established to prevent policyholders' confusion. It is expected to enhance the degree of equity among insureds and solve the problem of nonacceptance of high discounted group.
* In 2011, classes of Bonus-malus system are subdivided into 23 classes and the number of classes will grow in 29 from 2012 to 2017. The rate for the 29th class will be 30%. In case the policyholder makes an insurance contract in condition of the 23rd class in 2011, he is subject to 38%, and the policyholder in condition of the 24th class in 2012, he is subject to 36%.
o Classification based on a model of car is adopted for physical damage of private automobile in April, 2007. Private automobiles are sorted to 262 models and grouped into 21 levels on the basis of relative loss ratios. Each company can freely determine one's rate. But size of the entire written premium must be kept unchanged. This will improve the degree of equity and make manufacturers to reduce the prices of auto parts.
according to mileage from December, 2011. The policyholder can get a maximum discount rate of 13 percent.
o There is no classification based on territorial area. But there have been significant differences in loss ratio by territorial area, KIDI collected many data to apply them in premium rating.
8-3. Deregulation on Insurance Rate Approval System
o Before April 1st 2000 - Prior approval system
- Insurance companies can use the rate provided by KIDI o Since April 1st 2000
- File & use system
- Insurance companies can calculate additional premium determined according to their own business results. But they shall use the pure premium provided by KIDI
o Since August 1st 2001 - File & use system
- Every insurer can make their own premium. The pure premium provided by KIDI is only reference rate for insurance companies.
o Since September 2003 - Use & report system
Insurance companies can use the changed rates freely. After using the rates, they must report the information concerning rate revision to the authorities on a quarterly basis. But in some limited cases like a highly fluctuated rate change or the introduced new rating factor, they should have the file & use system for the new rates.
< The Annual Plan of Insurance Rate Liberalization >
(Unit : %)
Bonus-Malus Rate Diriving
Experience Rate Base Premium Non-Fleet Fleet Liab-ility Compre-hensive Liability Compre-hensive Liab-ility Compre-hensive Liab-ility Compre-hensive ‘94.4 10 20 Flex Rate (±α%) ‘96.8 Abolish-ed 20 10 3～10 ‘97.8 20 10 3～10 3～10 ‘98.8 20 Abolish-ed 6～20 6～20 ‘00.4
Abolish-ed AbolishingFlex Rate AbolishingFlex Rate Liberalization of Loading Charge Liberalization of Loading Charge Liberal Rate ‘01.1 Premium of Multi-personnelLiberalization of Pure
Commercial Auto Policy Liberalization of Pure premium Liberalization of Pure premium ‘01.8
Personal & Business Auto policy Liberalization of Pure premium Liberalization of Pure premium
•Appendix I. Korea`s Automobile Insurance
•Appendix II. Glossaries
•Appendix III. Special Clauses
•Appendix IV. KIDI's Brief History & Members
•Appendix V. KIDI Organizational Chart
Korea`s Automobile Insurance
□ Automobile Insurance Products
Insurance Liability Coverage IBodily Injury Compulsory Insurance Business Automobile Insurance Property Damage Liability Coverage Commercial Automobile Insurance Bodily Injury Liability Coverage II Voluntary Insurance Two-wheeled Motor Vehicle Insurance Expanded Medical Payments Coverage Farm Machinery Insurance Uninsured Motorist Coverage Physical Damage Coverage Others -․Driver`s Insurance ․Motor Trader Insurance ․Automobile Insurance
in Foreign Currency
□ Motor Vehicle to be Insured by Insurance Product
o Private Automobile Insurance All private passenger vehicles owned byan individual or a self-employed person o Business Automobile Insurance All passenger vehicles, official vehicles,and construction machinery except for
o Commercial Automobile Insurance Allmachines, and rental vehiclescommercial vehicles, construction o Two-wheeled Motor Vehicle Insurance All two-wheeled motor vehicles andmotorbikes o Farm Machinery Insurance Cultivators, farm tractors, and combines
Appendix II. Glossaries
Private Automobile Insurance
Privately-owned motor vehicles with a seating capacity of ten or less persons can be insured. A policyholder can select one or more of six types of coverage(Bodily Injury Liability Coverage I, Bodily Injury Liability Coverage II, Property Damage Liability Coverage, Expanded Medical Payments Coverage, Uninsured Motorist Coverage, and Physical Damage Coverage) and insure him/herself or his/her property. Bodily Injury Liability Coverage I and Property Damage Liability Coverage are compulsory to all automobiles.
Private Automobile Insurance Plus
Private Automobile Insurance Plus is a high quality product that expands the scope of indemnification for bodily injury of the insured and damage of the insured vehicle.
Business Automobile Insurance
All non-commercial motor vehicles except for privately-owned motor vehicle with a seating capacity of ten or less persons can be insured. A policyholder can select one or more of six types of coverage(Bodily Injury Liability Coverage I, Bodily Injury Liability Coverage II, Property Damage Liability Coverage, Expanded Medical Payments Coverage, Uninsured Motorist Coverage, and Physical Damage Coverage) and insure him/herself or his/her property. Bodily Injury Liability Coverage I and Property Damage Liability Coverage are compulsory to all automobiles.
Business Automobile Insurance Plus
There are four types of motor vehicles that can be insured ; privately-owned motor vehicle of the third class van, light-weight van or privately-owned motor vehicle of the fourth class truck, light-weight truck. This is a high quality product that expands the scope of indemnification for bodily injury of the insured and damage of the insured vehicle.
Commercial Automobile Insurance
All commercial vehicles can be insured. A policyholder can select one or more of five types of coverage(Bodily Injury Liability Coverage I, Bodily Injury Liability Coverage II, Property Damage Liability Coverage, Expanded Medical Payments, Physical Damage Coverage). Bodily Injury Liability Coverage I,
Bodily Injury Liability Coverage II and Property Damage Liability Coverage are compulsory.
Two-wheeled Motor Vehicle Insurance
Two-wheeled motor vehicle and motor bike can be insured. A policyholder can select one or more of six types of coverage(Bodily Injury Liability Coverage I, Bodily Injury Liability Coverage II, Property Damage Liability Coverage, Expanded Medical Payments Coverage, Uninsured Motorist Coverage, and Physical Damage Coverage) and insure him/herself or his/her property. Bodily Injury Liability Coverage I and Property Damage Liability Coverage are compulsory.
Farm Machinery Insurance
Farm machinery such as cultivator, farm tractor, and combine can be insured. A policyholder can select one or more of four types of coverage(Bodily Injury Liability Coverage, Property Damage Liability Coverage, Expanded Medical Payments Coverage, Farm Machinery Damage Coverage) and insure him/herself or his/her property.
A person who drives a vehicle irrespective of owning a vehicle can be insured. The insured receives indemnification for damage caused by a car accident.
Motor Trader Insurance
A motor trader, who is a person or persons actively operating a formal business on a full or part-time basis for profit, either selling (used) vehicles or providing a service relating to repair or maintenance of motor vehicle, can insure his/her property. This insurance compensates for damage caused by the motor trader during the use or management of vehicle.
Automobile Insurance in Foreign Currency
Foreigner-owned or foreign institution-owned motor vehicle, U.N. motor vehicle can be insured. A policyholder can insure him/herself or his/her property among four types of coverage(Bodily injury I, Property Damage, Physical Damage, Medical Expenses). Premiums and insured amount are marked by USD, and its policy is in English.
Bodily Injury Liability Coverage I
to pay as a result of he/she being legally liable for a person`s death or injury, or damage to a person`s property resulted from an car accident. This coverage is compulsory to those who want to insure him/herself.
Bodily Injury Liability Coverage II
The coverage insures the insured for all amounts exceeding the limit of liability of the compulsory automobile liability insurance.
Property Damage Liability Coverage
The coverage indemnifies the insured against property damage of the third party resulted from a car accident.
Expanded Medical Payments Coverage
The coverage insures the insured or his/her family member(s) for the insured`s or his/her family member`s death or bodily injury.
Physical Damage Coverage
The coverage insures the insured vehicle for all damages resulted from physical damage, car theft, fire, or flood.
Uninsured Motorist Coverage
The coverage can be insured as long as the insured already has Bodily Injury I, Bodily Injury II, Property Damage, and Personal Accident Coverage. The coverage insure the insured for his/her death or bodily injury caused by an uninsured vehicle.
FY (Fiscal Year)
The fiscal year for the Korean insurance industry begins on January 1 and ends on December 31.
The term of「spouse」in this refers to legal spouse, or spouse in a real martial relationship.
Special Clauses for Family Driving only
An insurer shall indemnify if the insured limited the drivers of the automobile specified in the policy to the insured and his(her) family members only. However, this will not apply to the Bodily Injury Liability I Coverage.
The term of「family members」in this refers to ① parents or foster parents, ② parents or foster parents of the spouse of the named insured, living together, ③ legal spouse, or spouse in a real martial relationship, ④ child born in a legal or real martial relationship, foster child, or ⑤ daughter-in-law
Special Clauses for Married-couple Driving only
An insurer shall indemnify if the insured limited the drivers of the automobile specified in the policy to the insured and his(her) spouse only. However, this will not apply to the Bodily Injury Liability I Coverage.
Special Clauses for Driving by age of drivers
For example, in case that the insured limits the drivers of the automobile specified in the policy to those of age 21 or older only, the insurer shall indemnify as prescribed in the clauses. However, this will not apply to the Bodily Injury Liability I Coverage.
Special Clauses for Driving of Other Automobile
In case that the insured suffers a loss incurred by the legal liability against an other party arising out of the bodily injury accident or property damage accident occurred, or that the insured suffered bodily injury while the insured was driving another automobile(except for the accident occurred while parking or stopping the automobile), the insured shall consider the other automobile driven by the insured as the insured automobile covered by Bodily Injury Liability II Coverage, Property Damage Liability Coverage or Expanded Medical Payment Coverage of General Clauses, and indemnify as prescribed in the clauses.
KIDI's Brief History & Members
1983. 12. 16 Established Korea Non-life Insurance Rating Association 1988. 12. 31
Insurance Business Law amended to include a provision regarding the legal background for the establishment of an insurance rate-making organization
1989. 11. 18 Officially authorized to establish Korea Insurance Development Institute (KIDI)
1989. 11. 27 Established Korea Insurance Development Institute(Korea Non-life Insurance Rating Association dissolved)
1992. 03. 11 Established Korea Automobile Insurance Repair Research & Training Center as a subsidiary of Korea Insurance Development Institute
1992. 05. 06 Designated a business partner responsible for managing Insurance Information Network
1995. 09. 01 Insurance Research Center established
1999. 10. 03 Held jointly EEAC (East Asia Actuarial Committee) 2000. 02. 01 Opened KIDI Digital Management System
2000. 03. 10 Designated as an organization to provide the insurance statistics (published Annual Insurance Statistics, Insurance Statistics Yearbook) 2000. 05 Designated 「Insurance Development Research」 as an academic journal 2000. 06 Designated as the organization operating insurance examinations for
actuary and claim adjuster
2000. 08. 01 Opened KIDIPOOL (Knowledge Management System) 2003. 12. 01 20th Anniversary of Korea Insurance Development Institute 2005. 10. 04 Opened KIDI Consortium Retirement Payment System (DB type)
2005. 12. 01 Opened KIDI Consortium Retirement Payment System (DC & IRA type) 2007. 12. 07 Korea Insurance Research Institute(KIRI) estabilished (Insurance Research
Center is developed and spcialized)
2010. 11. 25 Korea Insurance Research Institute (KIRI) was founded as a new corporation
2011. 04 Eastablished ICPS(Insurance Claims Poolins System) Claims Map system 2012. 02 Opened AIPIS (Auto Insurance Premium Integrated check System) 2013. 09 Opened Dormant Insurance Claims Inquiry System
Life Insurance Non-Life Insurance
•Hanwha Life Insurance Co., Ltd. •Meritz Fire & Marine Insurance Co., Ltd. •Alianz Life Insurance Co., Ltd. •Hanwha Non-life Insurance Co., Ltd. •Samsung Life Insurance Co., Ltd. •Lotte Non-life Insurance Co., Ltd. •Heungkuk Life Insurance Co., Ltd. •MG Non-life Insurance Co., Ltd.
•Kyobo Life Insurance Co., Ltd. •Heungkuk Fire & Marine Insurance Co., Ltd. •Hyundai Life Insurance Co., Ltd •Samsung Fire & Marine Insurance Co., Ltd. •Shinhan Life Insurance Co., Ltd. •Hyundai Marine & Fire Insurance Co., Ltd. •Dongbu Life Insurance Co., Ltd. •LIG Insurance Co., Ltd.
•Dongyang Life Insurance Co., Ltd. •Dongbu Fire & Marine Insurance Co., Ltd. •MetLife Life Insurance Co., Ltd. •American Insurance Group, Inc.
•ACE Life Insurance, Ltd. •Seoul Guarantee Insurance Co., Ltd. •PCA Life Insurance Co., Ltd. •AXA Non-life Insurance Co., Ltd. •WOORIAVIVA Life Insurance Co., Ltd. •The-K Non-life Insurance Co., Ltd. •KDB Life Insurance Co., Ltd. •ERGO Daum Direct General Insurance Co., Ltd. •Mirae Asset Life Insurance Co., Ltd. •Federal Insurance Company Korea •KB Life Insurance Co., Ltd. •ACE American Insurance Company •LINA Life Insurance Co. Ltd. •Mitsui Sumitomo Co., Ltd.
•AIA Life Insurance Co., Ltd. •Hicar Direct Auto Insurance Co., Ltd. •Prudential Life Insurance Co., Ltd. •Nonghyup Property & Casualty InsuranceCo., Ltd. •ING Life Insurance Co., Ltd.
•HANA Life Insurance Co., Ltd. •CARDIF Life Insurance Co., Ltd.. •IBK Insurance Co., Ltd.
•Nonghyup Life Insurance Co., Ltd. •Kyobo Lifeplanet Insurance Company
Korea Insurance Development Institute
38, Gukjegeumyung-ro 6-gil, Yeongdeungpo-gu, Seoul, 150-606, Korea TEL 82-2-368-4156
FAX 82-2-368-4052 www.kidi.or.kr