Life Insurance Growth Despite COVID-19... "Concerns Over Profitability Decline in Savings Insurance"

Korea Insurance Research Institute, Report on COVID-19 and Trends in the Personal Life Insurance Market

Source: Korea Insurance Research Institute

[Asia Economy Reporter Oh Hyung-gil] Despite the spread of the novel coronavirus infection (COVID-19), the individual life insurance market recorded high growth. However, as COVID-19 shows signs of resurgence and the government's economic stimulus effects may have limitations, it is pointed out that insurance companies need to secure new markets in preparation for a reduction in individual life insurance subscription capacity.

Kim Se-jung, a research fellow at the Korea Insurance Research Institute, stated in the report "COVID-19 and Trends in the Individual Life Insurance Market" on the 25th, "Monthly first-year premiums in the first half of this year, when COVID-19 spread, showed an increase rate of over 20% except for May, and premium income also increased significantly."

In the first half of the year, death insurance experienced high growth compared to the same months last year due to discontinued marketing effects in February and March, but growth has slowed since April. It is analyzed that the discontinued marketing effect due to the reduction in the guaranteed interest rate of protection-type insurance offset the contraction in sales.

Researcher Kim said, "In the current situation where COVID-19 is resurging, there are no one-time sales expansion factors like the discontinued effect of death insurance," and "Since the supervisory authorities are taking measures against popular no-surrender and low-surrender refund insurance, the contraction in death insurance sales may expand."

Annuity insurance has also continued to see a decrease or stagnation in premium income except for April, while savings insurance has shown a significant increase compared to the same months last year since February.

Regarding the lapse rates of individual life insurance, death insurance, annuity insurance, and savings insurance all showed a temporary increase in lapses in March but fell to normal levels from April to June.

He diagnosed, "Thanks to the discontinued effect of death insurance and the high growth of savings insurance through bancassurance, high growth was shown despite COVID-19," adding, "The growth of death insurance appears to be temporary, whereas the high growth of savings insurance is likely to continue in the short term."

He also warned, "The economic environment changes caused by COVID-19 provided an opportunity for life insurers to expand their scale centered on savings insurance," but "amid deteriorating asset management conditions, aggressive expansion of savings insurance sales may lead to a decline in profitability in the future."

He continued, "With the number of COVID-19 confirmed cases sharply increasing this month, concerns about resurgence are growing," and suggested, "It is necessary to actively secure new markets such as digital insurance and health management services using IT technology in preparation for the contraction of the individual life insurance market."