[Insurance Companies Targeting Seniors] ①Regulatory Easing for Senior Housing... Will It Accelerate?

Editor's NoteAs the domestic population aged 65 and over surpassed 10 million this year, the insurance industry is accelerating its efforts to target the senior market. Insurance companies are focusing on developing customized insurance products for senior customers while expanding their businesses into non-insurance areas such as healthcare and silver towns. This article examines the insurance industry's strategy to seize new market opportunities arising from demographic changes and to emerge as a comprehensive retirement management service provider in an aging society.

In South Korea, which is rapidly entering an aging society, the senior housing business is expected to enter a new phase. Recent government deregulation measures are anticipated to give momentum to the previously sluggish senior housing projects by insurance companies.

Although life insurance companies have declared their entry into the senior housing business, actual project progress has been slow due to regulatory and practical challenges involved in establishment. However, as the government recently relaxed regulations by changing the requirement for building and land 'ownership' to 'usage rights' for existing operators and providing benefits when insurance companies invest in rental housing, industry interest is growing.

Unfastening Regulatory Buttons... When for Nursing Facilities?

One of the biggest obstacles to establishing senior housing in Korea has been the issue of land and building ownership. According to existing regulations, ownership of the site and building was mandatory to establish senior welfare housing or nursing facilities. This caused insurance companies significant difficulties in purchasing land and constructing buildings. Since large-scale funding was required, the risks were substantial, which made companies hesitant to proceed with projects.

However, in July, the government announced the 'Senior Residence Activation Plan' jointly with related ministries, which is expected to greatly improve the business environment. According to the new policy, it is now possible to establish senior welfare housing with usage rights alone, without necessarily holding ownership.

However, since nursing facilities are not included in the deregulation measures, the insurance industry believes it needs to wait and see a bit longer. It is easy to distinguish that among senior housing, 'senior welfare housing' is for healthy elderly people, while 'nursing facilities' are for patients who have received long-term care grades. Currently, among insurance companies in Korea, only KB Life operates senior welfare housing through its subsidiary KB Golden Life Care. Considering that the official entry into the senior housing market follows the sequence of day and night care centers → nursing homes → senior welfare housing, deregulation of nursing facilities is also necessary.

Additionally, recent policy changes allowing insurance companies to invest in rental housing are noteworthy. These changes apply a risk factor for long-term rental housing related to solvency ratios and provide tax benefits when rental housing is comprehensively acquired under the condition of continued operation. These policy changes are expected to offer insurance companies new opportunities in rental-type silver towns.

After Site Exploration... Insurance Companies Start Engines

Life insurers such as NH Nonghyup Life and Samsung Life have already formed task forces (TF) within their organizations to plan silver town projects. NH Nonghyup Life is promoting senior business through its Future Strategy Team within the New Business Promotion Division. Recently, staff members reportedly visited areas near Seoul to explore sites and study nursing facility cases. Although both companies currently have only a handful of employees dedicated to senior business, they are continuously monitoring the sector at the company level.

The reason life insurers focus more than non-life insurers is that the main customers of life insurance products are middle-aged and older adults. As these customers soon enter old age, they become potential clients for senior housing. An insurance industry official explained, "Life insurers have the advantage of naturally expanding into the senior housing business by leveraging their existing customer base."

Looking at Japan, these changes become even more predictable. The background behind Sompo Care, a subsidiary of Sompo Holdings, a major Japanese insurer, successfully establishing over 30,000 senior housing units was the government's active support policies. Clear government promotion strategies, including tax incentives, made this possible. Korea is now expected to follow a similar path. Shinhan Life's nursing business subsidiary, Shinhan Life Care, also visited Japan multiple times to learn from precedents before launching its own model.

However, experts point out that for the success of this business, a comprehensive approach beyond simple deregulation is necessary. Researchers Im Jun and Jung Sujin stated in their recently published report, 'Research on Insurance Companies' Senior Market Business Strategies,' that "It may be advantageous for insurance companies to promote senior-related businesses through separate subsidiaries rather than the main body to build a senior-specialized brand." They added, "In the short term, establishing subsidiaries related to long-term care services and silver towns, and in the long term, expanding the business scope to develop into a senior-specialized operator can be considered."