Insurance and Banks Call for Tax Benefits on Products Addressing Aging and Low Birthrate [Future Finance Seminar]

Session 1 'Changes in Population Structure and Finance'
Insurance Industry "Tax Benefits Needed for Medical Expense Coverage Products"
Banking Sector Proposes Incentives for Low Birthrate Products and Trust Activation
Government Research Institutes "Risk Factors Exist for Self-Employed, etc."

As the population structure changes due to aging and low birth rates, the ripple effects on the financial industry are also increasing, leading to calls for the development of products and policy incentives to respond to these changes. The banking and insurance sectors emphasize the need for tax benefits and institutional improvements to facilitate active product development.

At the ‘Future Finance Seminar’ held on the 8th at the Bankers’ Hall in Jung-gu, Seoul, representatives from the insurance and banking industries stated that the financial industry can fulfill various roles, including serving as a social safety net, in response to changes in the population structure.

The insurance industry is making efforts to develop medical expense coverage products such as children’s insurance and stressed that government attention and policy support are necessary for subscription and retention. Regarding retirement pensions and elderly medical expense insurance products designed for old-age preparation, tax benefits are needed. Kim In-ho, Executive Director of the Life Insurance Association, said, “It is necessary to consider expanding tax benefits or making them tax-exempt when receiving income tax on retirement pensions for more than 10 years or for life.” He also emphasized that the financial industry can play a role as a social safety net and that policy considerations such as allowing land ownership or leasing related to nursing facilities are needed so that the insurance industry can supply nursing services. He also called for the role of financial authorities, suggesting that networking with overseas authorities should be facilitated to promote the overseas expansion of the insurance industry.

In the banking sector, policy considerations for regional banks were emphasized. Park Chang-ok, Executive Director of the Korea Federation of Banks, said, “Regionally based banks play an important role in supplying quality jobs within their regions and are crucial for the virtuous cycle of funds and economic growth in those areas.” He noted that a decline in the youth population due to low birth rates would have a greater impact on regional areas than on the metropolitan area. He also requested incentives for product development aimed at alleviating low birth rates (such as recognizing social contribution achievements when developing low birth rate products) and deregulation of trust systems (such as easing restrictions on trustable assets).

On the 8th, participants are engaged in a panel discussion during Session 1, "Changes in Demographics and Finance," at the "Future Finance Seminar" held at the Bankers Hall in Jung-gu, Seoul.
[Photo by Jeon Young-joo]

The Bank of Korea and the Korea Development Institute (KDI) stated that changes in the population structure pose various risks from a macroeconomic perspective. Lim Kwang-gyu, Head of the Stability Team at the Bank of Korea, mentioned the issue of self-employed debt due to population aging. Lim said, “As the elderly population increases, startups to maintain life after retirement also increase.” He added, “Currently, a large portion of personal business loans are secured by non-residential collateral, and if the number of self-employed increases further, this problem will recur.” He also pointed out the need to stabilize income for the elderly through measures such as securitization of housing pensions, reverse mortgages, and the activation of REITs (Real Estate Investment Trusts).

Jung Kyu-chul, Director of Economic Forecasting at KDI, predicted that the low-growth and low-inflation trend will continue due to changes in the population structure. He emphasized that policies to address this should be implemented according to each specific goal. Pursuing multiple objectives with a single policy tool could divert the policy from its original goal. He stated that monetary policy should focus on price stability, macroprudential policies should aim for financial stability, and that protecting vulnerable groups cannot be solved by monetary policy alone but requires concurrent welfare and fiscal policies.

Kang Young-soo, Director of Financial Policy at the Financial Services Commission, said regarding the demands from the financial sector, “The authorities are conducting extensive reviews and preparations.” He added that the role of financial companies should be expanded in non-financial areas and that responses to issues such as regional extinction, household debt, and self-employed problems will be coordinated with related institutions including the Bank of Korea.

Meanwhile, Seo Jeong-ho, Senior Research Fellow at the Korea Institute of Finance, argued in his presentation on ‘The Impact of Population Changes on the Financial Sector’ that as the population structure changes and economic growth rates decline, the financial environment will also change, necessitating financial policy directions tailored to alleviating low birth rates and the elderly population. Park Jung-ho, Partner at McKinsey & Company, emphasized that the financial industry should play a social role supporting economic growth in response to demographic changes. He particularly suggested developing and introducing innovative financial solutions considering Korea’s demographic characteristics.