Life Insurance Companies: Which Area Sees the Highest Spending Among Customers, Agents, and Society? (Comprehensive)

Total Expenditure of 25 Life Insurance Companies Shows '7:2:1' Golden Ratio

Stable Distribution to Consumers, Distribution Channels, and Society

[Asia Economy Reporter Oh Hyung-gil] 'Do life insurance companies spend more on customers, agents, or society?'

It has been found that life insurance companies' expenditures are stably distributed in a ratio of 7:2:1 among insurance consumers, insurance companies and distribution channels, and society. The balanced spending among stakeholders surrounding insurance is interpreted as meaning that life insurers have continuously strived for a tripartite public interest.

According to the report titled "A Study on the Balance of Income and Expenditure and Tripartite Public Interest of Life Insurance Companies" recently published by the Korea Insurance Academic Society, the share of expenditures related to insurance consumers, such as insurance claims and reserve liabilities, averaged 74.2% from 2003 to 2018.

The share of expenditures related to insurance companies and distribution channels, such as operating expenses and net income for the current period, was 24.8%, and the share of expenditures related to society, such as corporate taxes, was 1.0%.

The report stated, "The share of expenditures by item for life insurers has been very stable over the past 16 years," diagnosing that the life insurance industry is achieving 'tripartite public interest.'

Tripartite public interest is a type of 'win-win' strategy through transactions among market participants. It means that the balance is maintained so that no side among stakeholders such as life insurance consumers, companies and distribution channels, and society is biased.

Life Insurance Industry Total Expenditure Yearly Share

The top companies in insurance consumer expenditures were KB Life, NH Nonghyup Life, DGB Life, ABL Life, IBK Life, Hana Life, and Kyobo Lifeplanet. On the other hand, PCA Life (merged with Mirae Asset Life), LINA Life, MetLife, DB Life, Chubb Life, AIA Life, and Mirae Asset Life had lower consumer expenditures. Low consumer expenditures imply a possibility of losing trust from consumers.

The top companies in distribution channel expenditures were Mirae Asset Life, LINA Life, DB Life, Kyobo Lifeplanet, MetLife, and Chubb Life. This indicates that these companies have a high proportion of operating expenses or high net income levels.

Conversely, 11 companies including Kyobo Lifeplanet, Chubb Life, ABL Life, Fubon Hyundai, KDB Life, NH Nonghyup Life, Heungkuk Life, PCA Life, Tongyang Life, and KB Life had low expenditures related to society. It was analyzed that companies with poor profitability did not pay corporate taxes, resulting in a low share.

In particular, the report noted, "In 2003, the share of insurance operating income was larger, but in 2018, the share of expenditures related to insurance consumers was greater," and judged that "life insurers are using more income generated from investment operating income for expenditures related to insurance consumers, showing continuous efforts for tripartite public interest."

MetLife, PCA Life, and LINA Life were pointed out as having high insurance operating income but low expenditures related to insurance consumers, indicating relatively large expenditures on companies and shareholders.

Dr. Kim Hyun-min of Kyung Hee University, who conducted the research, explained, "We wanted to examine whether the three stakeholders of the life insurance system?insurance consumers, insurance companies and distribution channels, and society?are developing in a balanced way."

He added, "When expenditures related to consumers are high, it is difficult to secure financial stability due to challenges in appropriate operating expenses or generating net income for the current period. If expenditures on insurance distribution channels are large or net income is excessively generated, there is a risk of losing trust from insurance consumers, so caution is needed."