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									                           Emerging Market and
                           Investment Opportunities in
                           South Korean Motor Insurance
                           to 2016
                           Industry Forecast Report
                           Reference code: IS0204MR

                           Published: March 2012
BRICdata
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 EXECUTIVE SUMMARY



 1 Executive Summary
 Market size and growth potential

          The South Korean motor insurance category increased in written premium value from US$11.29 billion in 2007 to
           US$12.02 billion in 2011, at a compound annual growth rate (CAGR) of 1.6% during the review period (2007–
           2011). This growth was supported by the introduction of mandatory motor insurance policies in South Korea and
           by the country’s rising number of passenger car sales.

          The South Korean motor insurance category is projected to grow at a CAGR of 5.7% over the forecast period
           (2012–2016), to value US$15.02 billion in 2016. The rapid development of automobile sales is expected to fuel
           the motor insurance growth over the forecast period.
 Trends and drivers

          The South Korean motor insurance category is growing steadily due to the introduction of mandatory motor
           liability insurance policies and the country’s rising number of passenger car sales. According to South Korean
           Law, all car users must purchase compulsory automobile liability insurance (CALI) which provides insurance
           cover against physical injury or death caused to a third party in a road accident. The implementation of
           mandatory motor insurance policy has been one of the main growth drivers for South Korean motor insurance
           during the review period.

          The South Korean motor insurance category grew at a CAGR of 1.6% during the review period, which was
           supported by the country’s improving motor insurance penetration level. South Korea’s motor insurance
           penetration, defined by the gross written premiums as a percentage of GDP, increased from 1.00% in 2007 to
           1.10% in 2011. It is expected to increase further to 1.19% in 2016. The country’s improving motor insurance
           penetration was primarily driven by the sale of compulsory automobile liability insurance policies. The rising
           penetration level will improve the revenues of South Korean motor insurance companies over the forecast period.

          The South Korean government has passed several support schemes to encourage consumer spending and
           support the expansion of the country’s automobile industry during the review period. The government’s support
           schemes include multiple tax benefits for consumers who buy new cars and trade in vehicle models bought prior
           to 1999. Furthermore, the government provides additional help for automobile research and development
           activities, and vehicle financing norms have been made easier to attract more automobile customers. These
           government supported schemes have supported the sales of automobiles, which recorded annual growth rates of
           22% in 2009, and 16% in 2010. This also drove the South Korean motor insurance category growth during the
           review period.
 Competitive landscape

          The South Korean motor insurance category is highly concentrated, and includes a small number of local
           companies and several global businesses with large market shares. The category is predominantly controlled by
           domestic businesses.

          Samsung Fire and Marine is the market leader in the motor insurance category, and this company alone
           accounted for a share of 31% of the South Korean non-life insurance segment in 2010. The company offers a
           range of products in South Korea, and is one of the largest non-life insurers in world. Other leading South Korean
           non-life insurance insurers include Kyobo Life, Dongbu Insurance and Meritz Fire & Marine Insurance. Non-life
           insurance incorporates property insurance, motor insurance, general liability insurance, and marine, aviation and
           transit insurance.
 Challenges

          The South Korean motor insurance category loss ratio is one of the highest among Asian countries. The health
           insurance losses grew at a CAGR 4.7% during the review period, and the loss ratio increased from 72.91% in
           2007 to 87.7% in 2011. The high loss ratio presents a challenge for the existing motor insurance businesses and
           will have negative impact on the overall motor insurance category growth over the forecast period.

          South Korea has an uncertain climatic condition and is exposed to natural disaster such as flood or typhoons. For
           example, the country recorded 16 inches of rain in 24 four-hour periods in 2011. This caused significant damage
           to properties and cars in South Korea, which adversely affected the bottom line of motor insurance companies in
           the country.




Emerging Market and Investment Opportunities in South Korean Motor Insurance to 2016                                 Page 2

© BRICdata. This product is licensed and is not to be photocopied                                      Published: March 2012
 EXECUTIVE SUMMARY



 Regulation

          The South Korean government enacted several regulations to control and govern the country’s motor insurance
           category during the review period. According to South Korean Law, all car users must purchase compulsory
           automobile liability insurance (CALI) which provides insurance cover against physical injury or death caused to a
           third party in a road accident. The auto liability insurance is mandatory for vehicles, which have an engine
           displacement size of over 50cc, to use the country’s road systems. The motor insurance policy is issued for a
           period of one year, and the policy must be renewed after its coverage period ends.




Emerging Market and Investment Opportunities in South Korean Motor Insurance to 2016                                Page 3

© BRICdata. This product is licensed and is not to be photocopied                                     Published: March 2012
 TABLE OF CONTENTS



 TABLE OF CONTENTS
 1         Executive Summary ......................................................................................................................... 2
 2         South Korean Motor Insurance Market Environment ..................................................................... 8
 2.1       Macroeconomic Drivers ...................................................................................................................... 8
 2.1.1     GDP growth ....................................................................................................................................... 8
 2.1.2     GDP by key sectors............................................................................................................................ 9
 2.1.3     Inflation rate ..................................................................................................................................... 10
 2.1.4     FDI inflows by sector ........................................................................................................................ 11
 2.1.5     Annual disposable income ................................................................................................................ 12
 2.1.6     Market capitalization trend ................................................................................................................ 13
 2.1.7     Urban and rural population ............................................................................................................... 14
 2.2       South Korean Automobile Industry Outlook ...................................................................................... 15
 2.3       Market Share of Motor Insurance in Non-Life Insurance.................................................................... 17
 3         Market Sizing and Future Growth Potential .................................................................................. 18
 3.1       South Korea’s Position Among the Emerging Motor Insurance Categories ........................................ 18
 3.2       South Korea Position Among Top 10 Countries by Insurance Premium Volume ................................ 19
 3.3       South Korean Motor Insurance Market Size by Volume .................................................................... 20
 3.4       South Korean Motor Insurance Market Size by Value ....................................................................... 21
 3.5       South Korean Motor Insurance Market Size by Sub-Category ........................................................... 22
 3.5.1     South Korean motor hull insurance market size by volume ............................................................... 22
 3.5.2     South Korean motor hull insurance market size by value .................................................................. 23
 3.5.3     South Korean motor third-party liability insurance market size by volume .......................................... 24
 3.5.4     South Korean motor third-party liability insurance market size by value............................................. 25
 4         Market Attractiveness and Challenges.......................................................................................... 26
 4.1       Profitability Indicators ....................................................................................................................... 26
 4.2       Trends and Growth Drivers............................................................................................................... 28
 4.3       Challenges ....................................................................................................................................... 31
 5         Market Entry Strategies and Competitive Structure ..................................................................... 32
 5.1       Regulatory Framework ..................................................................................................................... 32
 5.2       Entry Strategy .................................................................................................................................. 33
 5.3       Competitive Landscape and Industry Structure ................................................................................. 34
 6         Business and Marketing Strategy.................................................................................................. 35
 6.1       Marketing Strategy ........................................................................................................................... 35
 6.1.1     Product strategy ............................................................................................................................... 35
 6.1.2     Pricing strategy ................................................................................................................................ 36
 6.1.3     Social media marketing .................................................................................................................... 36
 6.1.4     Virtual marketing .............................................................................................................................. 36
 6.2       Distribution Channels ....................................................................................................................... 37
 6.2.1     Telemarketing .................................................................................................................................. 37
 6.2.2     Bancassurance ................................................................................................................................ 37
 6.2.3     Internet.......................................
								
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