Insurers in South Korea can no longer grow by relying on premium income, partly due to a rapidly ageing population and a dwindling workforce, research showed.
A study by the Korea Insurance Research Institute (KIRI) said that the combined insurance premiums of the market’s insurers are estimated to decline by 1.2% year-on-year to KRW199.89 trillion (US$176.8 billion), reported Pulse News. The figure is predicted to decline even further by 0.8% next year to KRW108.3 trillion.
Last year, the insurance industry’s combined premium income dipped by 1% to KRW202.3 trillion. If the prediction for next year holds true, this will be the first time the industry experiences a decline for three straight years.
According to the report, the downward trend in premium income is mostly caused by a decline in savings policy sales. One of the biggest challenges comes from population ageing, which results in a smaller working population, who are most likely to buy savings-type insurance products.
Another factor is that both life insurance and non-life insurers have been restructuring their sales portfolio by reducing the portion of savings policies ahead of the implementation of IFRS 17, which will take effect in 2021. The new accounting standard excludes insurance premiums on savings-type products from the company’s revenue, making its bottom line appear weaker.
KIRI’s projections show that Korean insurers’ combined revenue from savings-type insurance in 2019 will shrink 10.6% from this year, while non-life insurers’ revenue may plunge 28.6% year-on-year. For this year, life-insurers’ savings policy sales are estimated to fall 12.3% while non-life insurers’ will go down 28%