[The Golden Age of Non-Life Insurers]③ Desperate Life Insurers Eye New Businesses Including 'Yoyang and Sangjo'

Performance Bonus Celebrations Are Someone Else's Story Amid Sluggish Results
Lost Trust and Aging Population... Customer Numbers Decline
Urgent Need to Find New Revenue Sources

"The neighboring company (non-life insurance company) had a record-breaking bonus party, and it's very frustrating."

This is a complaint from a 7-year employee of a life insurance company. While non-life insurers held record-breaking bonus celebrations, life insurers are quietly passing through. This is because their performance is currently sluggish, and concerns about future revenue sources are deepening.

According to the industry on the 11th, life insurers' bonuses are generally decreasing compared to the previous year. In the case of Kyobo Life Insurance, considered one of the 'Big 3,' the exact payout rate was not disclosed, but employees say it has decreased compared to previous years. Hanwha Life, which has not yet finalized its bonus payments, is also expected to pay somewhat reduced bonuses. This contrasts with non-life insurers, which held record-breaking bonus celebrations due to outstanding performance. Samsung Fire & Marine Insurance set bonuses at 47% of annual salary, DB Insurance at 41%, and KB Insurance at 550% of monthly bonuses.

The problem is that this situation may continue for some time. Life insurance mainly focuses on protection-type sales that provide coverage after death or accidents. As society enters a super-aged phase, the existing customer base has reduced ability to pay premiums, and the younger generation, who are not marrying or having children, are avoiding products like whole life insurance, creating a double burden. According to Statistics Korea, the total fertility rate already dropped to 0.78 in 2022. This is the lowest rate, far below the OECD average of 1.59. It is expected that Korea will enter a super-aged society with over 20% of the population aged 65 or older by 2025.

Consumers' views are also unfavorable. In the past, life insurers increased short-term performance through overheated competition, such as hiding key terms in contracts, but industry trust significantly declined. According to the Korea Insurance Research Institute, the 25th-month retention rate, which indicates the percentage of policies maintained two years after enrollment, was only 61.4% in 2020. This means three out of five people cancel their life insurance within two years of enrollment. This is far below Singapore (96.1%), the United States (84.9%), Taiwan (88.9%), and Japan (89.2%). This reality is far from the life insurance industry's representative slogan of "from cradle to grave" customer protection.

The rate of incomplete sales, calculated by dividing the sum of quality-guaranteed cancellations, complaint cancellations, and invalid cases by the number of new contracts, is also higher than that of non-life insurers. The incomplete sales rate for life insurers is 0.07%, still more than three times that of non-life insurers (0.02%).

Ultimately, life insurers are in a position where they must regain customer trust while simultaneously finding new revenue sources. There is a call to move beyond simple product sales to services such as long-term care and funeral services, as well as digital healthcare. This sense of crisis is shared within the industry. Jung Hee-soo, chairman of the Life Insurance Association, emphasized, "We need to move away from whole life insurance that ends with paying benefits after death and expand into long-term care and funeral services."

In particular, digital healthcare is considered a field where rapid expansion is possible. With increased health awareness due to aging and policies promoting healthcare activation, various industries including pharmaceuticals and IT are entering the digital healthcare market, so it is important to seize the opportunity while it lasts. Kim Do-yeon, a researcher at KB Financial Management Research Institute, advised, "For insurance companies, digital healthcare now requires efforts to strengthen internal capabilities to provide truly personalized services beyond growth through external partnerships. To enhance the competitiveness of healthcare platforms, it is necessary to actively pursue strategic alliances and mergers and acquisitions (M&A) based on data and artificial intelligence (AI) predictions to build an independent ecosystem."