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 7,000 flooded cars -- among which at least 1,900 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 6,853 claims for flooded cars as of 9 a.m. Wednesday,
The number of claims for flooded imported luxury cars received by the country’s five largest insurance companies including Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and Meritz Fire & Marine Insurance, accumulates to 1,894.
The estimated claims amount to 85.59 billion won ($65.41 million). Luxury cars such as Mercedes-Benz S class, Porsche Panamera, Bentley and Ferrari models – which can cost hundreds of millions of won — are among the vehicles damaged.
“Having received nearly 7,000 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 Gangnam area, where many of the cars are expensive.
As a result, insurance companies held emergency meetings Tuesday to come up with ways to cope with the hefty claims.
Some are even known to be considering increasing car insurance premiums.
“As coverage for imported cars is expensive, this could fluctuate the loss ratio for the insurance companies,” explained 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, but it was widely expected for them to raise the figure.
Stock prices of insurers have been falling since Tuesday as market expects them to cover hefty compensation for flooded cars.
Samsung Fire & Marine Insurance was trading at 203,500 won, 0.97 percent lower than Friday session and DB Insurance at 63,000 won, 2.47 percent lower as of 2 p.m. Wednesday.
By Hong Yoo (email@example.com