Korea's driver insurance booms, navigates regulatory challenges

CAGR from 2016 to 2022 reached 8.6%.

The driver insurance market in Korea has seen significant growth from 2016 to 2022, with a compound annual growth rate of 8.6%, influenced by stricter legal regulations concerning traffic accidents, the Korean Re said. 

This growth is distinct from motor insurance, as driver insurance specifically protects individual drivers irrespective of the vehicle. 

Recent products in this category, especially post-2022, have expanded coverage in response to the legal changes, offering more comprehensive benefits.

Financially, the market has shown an interesting trend: while the loss ratio has decreased due to higher premiums, the expense ratio has increased, primarily due to rising acquisition costs. 

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However, the overall profitability, as indicated by the combined ratio, has improved.

Looking forward, the driver insurance market is expected to continue growing, driven by ongoing legislative emphasis on accident prevention and the implementation of IFRS 17, which encourages products with higher contractual service margins. 

Nonetheless, this growth brings challenges, notably the risks of excessive competition, moral hazard, and mis-selling. 

In response, the Financial Supervisory Service (FSS) has introduced measures like a 20-year cap on policy coverage periods to prevent insurance churning and ensure consumer protection.

The future of this market hinges on a careful balance. Insurers need to focus on responsible product development and risk management, while regulators must ensure a healthy competitive environment and consumer awareness. 

The goal is to sustain growth without compromising financial health or consumer interests.