News eDaily20 Nov 2017

South Korea:Insurers deterred by low take-up of quake cover

20 Nov 2017

Insurers in South Korea are reluctant to market quake cover because this class of business is seen as unprofitable due to a low take-up rate.

This is despite the fact that earthquakes are hitting the country, with the latest occurring on 15 November.

Insurance firms expect the volume of claims to be low, from last week's 5.4-magnitude quake which hit Pohang, North Gyeongsang Province, which is located in the southeast of the country. This is because the proportion of people who subscribed to tremor-related policies remains small.

The quake injured at least 75 people and caused the evacuation of more than 1,700, reported The Korea Times.

When a 5.8-magnitutde quake shook Gyeongju, North Gyeongsang Province, last year, insurance companies made payments in only 638 cases with the total amount standing at only about US$4 million.

There are policies covering damage from storms, hurricanes and floods. Quake cover is a rider to fire insurance policies. The ratio of fire insurance customers who can claim earthquake damage in proportion to the total number of policyholders stood at 0.06% at the end of last year, according to the Korea Insurance Development Institute. Automobile insurance policies only cover damage from storms and floods, not earthquakes.

The Financial Supervisory Service (FSS), non-life insurance companies and related institutions organised a task force to create protection policies against earthquakes after last year's Gyeongju quake. However, the task force failed to come up with a tangible outcome as insurers were skeptical they could sell such insurance.

"With the proportion of policies with quake special clauses remaining low, it is doubtful that any new policies would sell," an insurance executive said.

With insurance companies reluctant to introduce earthquake policies, public calls are growing that the government should further lead in pushing for the introduction of insurance covering earthquake damage. Currently, private non-life insurers are selling about 20 state-led insurance policies that can help recoup consumer losses from storms, floods and gas accidents.


 


 

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