Market Report: Asia/Pacific/Middle East - South Korea on reform path.

(From Reinsurance)

Byline: Peter Falush.

South Korea's non-life business - now the world's tenth largest market - was worth W20 180bn ($17.9 bn) in direct premiums in fiscal* 2002 (fiscal year, ending 31 March of the following year). This is a rise of 9.6% - two percentage points, slower than in the previous year. Weaker economic growth, reductions in motor insurance rates as well as more competitive market conditions explain the slow down, according to the Korea Non-life Insurance Association (KNIA).

The leading line is long-term (non-life) insurance, (a combination of property, personal accident, private annuity and disease covers) with policy duration of at least two years. This class accounting for 39.6% of total premiums - offers refunds to the policyholders who maintain premium payments for over two years. The premium increase was 9.3%, nearly twice as fast as in the previous year, raising this line to the top rank. At the same time the claims ratio remained a very satisfactory 12.4%.

Challenging leadership

The second largest line is automobile, with a share of 39.1% and a growth rate of 6.1%. The direct marketing of the product is leading to lower rates and challenges the leadership of the older, larger companies, especially since the entry of Kyobo Automobile Insurance, a direct marketing specialist, in 2001. The number of vehicles on the road increased by 8% to 13.9m, a rate faster than the growth of premium income.

The compulsory auto liability account accounts for a smaller part of this class, but has a higher incurred loss ratio (71.8%). Voluntary auto has been growing at a faster rate and it also has a lower incurred loss ratio of 66.4%.