The South Korean motor insurance industry is forecast to grow at a compound annual growth rate (CAGR) of 4.6% from KRW20.5 trillion ($15.4 billion) in 2023 to KRW25.7 trillion ($19.2 billion) in 2028, in terms of gross written premiums (GWP), according to GlobalData, a leading data and analytics company.

According to GlobalData’s Insurance Database, the South Korean motor insurance industry’s growth is expected to gradually pick up pace from 2024 and reach the pre-pandemic growth rate in 2027.

Anurag Baliarsingh , Insurance Analyst at GlobalData, comments: “The South Korean motor insurance industry witnessed a slower growth of 2.5% in 2022, which is expected to increase marginally to 3% in 2023. The slower growth was primarily driven by a semiconductor chip shortage and a subsequent rise in car prices, which led to lower vehicle sales.”

The vehicle sales, however, picked up pace in 2023 and are expected to continue in 2024, supporting motor insurance growth. According to the Korea Automobile and Mobility Association (KAMA), vehicle sales stood at 1.34 million during January-November 2023, registering a growth of 7.0% as compared to the same period in the previous year. In addition, according to the KAMA, car prices have also increased by around 10% on average as compared to the previous year, leading to higher premiums and supporting the growth of motor insurance.

However, a decline in motor insurance premium rates, driven by the stabilization of insurers’ loss ratio, will partially impact this growth over the next two to three years. Motor insurance premium rates have decreased by 2.5-3% in 2023 as compared to the previous year due to lower claims that have improved the insurers’ loss ratio. The loss ratio of motor insurers has declined by 0.5% during the first 10 months of 2023 as compared to the previous year. The trend is expected to continue in 2024.

Baliarsingh adds: “The shift in the sales of motor insurance policies from face-to-face to digital mediums is another factor that is leading to a subdued growth of motor insurance premiums. The popularity of online aggregators and a rise in the online distribution of products have made motor insurance premium prices more competitive. Due to increased competition, smaller insurers have started offering policies at a lower price to maintain their market share, which has declined the average premium price of motor insurance policies.”

Emerging trends such as usage-based insurance are also gaining popularity, thereby, leading to a slower growth of premiums. Consumers’ focus on convenience and low-cost insurance products has increased the popularity of online distribution and usage-based motor insurance.

Anurag concludes: “Recovery in the economy and increasing vehicle sales will support the growth of motor insurance during 2024-28. A healthy loss ratio driven by lower claims will also help South Korean motor insurers in re-assessing their risk exposure and cater to the changing market trends.”