SEOUL — The auto insurance sector is facing mounting challenges as the loss ratio for major insurers surged to 88.7% in February, according to recent industry data. This figure represents a dramatic 9.7 percentage point increase from the same period last year, which stood at 79.0%.

The sharp rise in losses is attributed to a spike in accidents during February's severe cold wave and heavy snowfall, pushing the loss ratio well above the industry's break-even point of approximately 80%. "The harsh winter conditions led to a significant increase in accident claims, resulting in a deficit in auto insurance operating profits for the year to date," explained an industry insider.

Adding to the industry's woes, major non-life insurance companies have recently confirmed auto insurance premium reductions of up to 1%, a move that is expected to further strain their financial performance. Moreover, the industry is bracing for additional cost pressures, including a 2.7% increase in hourly repair labor costs and a potential surge in traffic accidents during the spring travel season.

"With four consecutive years of premium reductions, coupled with rising repair costs and increased travel-related accidents, we anticipate a further deterioration in the auto insurance loss ratio," the insider warned.

The confluence of these factors has raised concerns about the long-term sustainability of auto insurance profitability, prompting industry stakeholders to reassess their strategies in the face of escalating challenges.