As the burden of auto insurance policies accumulates, the profitability of insurance companies focused on auto coverage is being challenged. With pressures to lower premiums, rising repair costs, and delays in improving the treatment system for minor injuries, AXA Insurance is now seeking new revenue sources in the rental car accident handling market.
According to the Financial Supervisory Service on May 19, AXA has recently reported a subsidiary business that provides and mediates accident reporting, investigation, and repair cost assessment services for rental car operators. When an accident occurs with a vehicle owned by a rental car company, AXA will handle everything from accident reporting to on-site investigation and assessment of repair costs, earning a commission for these services. This move is seen as an attempt to expand its accident handling capabilities, developed through its existing auto insurance compensation operations, into external services.
AXA's actions are closely tied to the declining profitability of auto insurance. The company reported an operating loss of 39.986 billion won last year, marking a return to the red. Its net loss also reached 33.784 billion won. The audit report identified a decrease in auto insurance revenue as a major reason for the poor performance, with auto insurance revenue dropping by 45.938 billion won compared to the previous year.
However, this issue is not unique to AXA. Auto insurance is heavily regulated, making premium adjustments subject to significant policy considerations. After lowering premiums for over four years, the industry raised them this year, while repair and treatment costs have continued to rise. Additionally, the introduction of the 'eight-week rule' to reduce excessive treatment for minor injuries has been indefinitely postponed, and policies like the vehicle five-part discount, which reduce premium income, are being pursued, further narrowing the profitability margins for insurers.
The limitations of specialized auto insurance models are also evident in the case of Carrot Insurance. Carrot grew by promoting per-mile auto insurance but continued to incur losses since its inception, ultimately being absorbed by Hanwha General Insurance. Before the merger, Carrot recorded annual losses of around 60 billion won. Industry experts suggest that without being integrated into Hanwha, it would have been challenging for Carrot to continue operating independently due to its high dependency on auto insurance, which limits its ability to offset losses with other lines of business.
Major insurance companies are also struggling with poor auto insurance performance. In the first quarter of this year, Samsung Fire & Marine, Hyundai Marine & Fire, DB Insurance, and KB Insurance collectively reported a deficit of 39.7 billion won in auto insurance. The loss ratio for auto insurance exceeded the breakeven point of 80%. Following last year's auto insurance losses that soared to around 700 billion won, the trend of deficits is likely to continue this year due to ongoing policy shifts.
However, it remains to be seen whether AXA's new subsidiary business will lead to immediate profitability. An AXA representative stated, "We are still in the preparation stage," adding that "no specific timeline has been confirmed."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.