April 26, 2024

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An imported car sits damaged near Gangnam subway station, southern Seoul, on Wednesday morning (Yonhap)

Insurance companies face costly claims for damage coverage for nearly 8,000 flooded cars -- among which at least 2,500 are from luxury brands -- after heavy rain battered Seoul and Gyeonggi Province this week.

According to the General Insurance Association of Korea, 12 automobile damage insurance companies received a total of 7,678 claims for flooded cars as of 1 p.m. Wednesday,

The number of claims for flooded imported luxury cars received by the country’s four largest insurance companies -- Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance and KB Insurance -- reached 2,171.

The estimated claims amount to 97.76 billion won ($74.59 million). Among the damaged vehicles are luxury cars such as the Mercedes-Benz S class, Porsche Panamera, Bentley and Ferrari models – which can cost hundreds of millions of won.

Insurers are likely to face pressure from regulators as authorities said on Wednesday afternoon that they would have the Financial Services Commission monitor whether the compensations are processed promptly. 

“Having received nearly 8,000 claims for flooded cars in two days is unprecedented,” said an official from an insurance company.

Insurance companies usually estimate compensation for flooded cars to stand at around 10 million won per car, but coverage will be more expensive this time as the rainfall concentrated in the affluent Gangnam area that is home to many expensive cars.

As a result, insurance companies held emergency meetings Tuesday to come up with ways to cope with the hefty claims.

Some are reportedly considering increasing car insurance premiums.

“As coverage for imported cars is expensive, this could affect the loss ratio for the insurance companies,” said another official from an insurance company.

The loss ratio is a ratio of losses paid out to premiums earned, expressed as a percentage.

A high loss ratio can be an indicator of financial distress for an insurance company.

The loss ratio of insurance companies had been kept below 80 percent until July but due to the recent flooded car coverage, the figure is likely to be raised. Stock prices of insurers have been falling since Tuesday as the market expects them to have to foot the exorbitant bill.

Samsung Fire & Marine Insurance shares on Wednesday closed at 203,500 won, 0.97 percent lower than Friday’s session and DB Insurance at 62,900 won, 2.63 percent lower.

By Hong Yoo (yoohong@heraldcorp.com)