[Insurance Companies Targeting Seniors]② Expanded Market for Insureds with Pre-existing Conditions Due to Aging Population

Insurance for policyholders with pre-existing conditions has become a battleground for insurance companies. This is a result of the industry seeking new breakthroughs as the popularity of savings-type insurance and whole life insurance?previously the main products of insurers?wanes due to demographic changes such as aging and the increase in single-person households.

Not only are life insurance companies continuously launching new products that strengthen health insurance coverage, but non-life insurers are also actively entering the market for insurance for policyholders with pre-existing conditions, which they had previously avoided due to high loss ratios.

Rediscovering the Market for Insurance for Policyholders with Pre-existing Conditions

With advances in medical technology and improvements in living standards, mortality rates have improved, and average life expectancy continues to rise. According to the 10th revised Experience Life Table released this year, the average life expectancy for men in Korea is 86.3 years and for women 90.7 years, increasing by 2.8 years and 2.2 years respectively compared to five years ago. The Experience Life Table is a mortality rate table by gender and age, created by observing the deaths of life insurance policyholders, and has been compiled every five years since the first table in 1988 in accordance with the Insurance Business Act.

According to the industry, recently insurers have been launching insurance products for policyholders with pre-existing conditions by relaxing underwriting standards to allow those with past disease histories?who previously found it difficult to obtain insurance?to enroll. In exchange, premiums are higher and coverage is reduced. These products, also called “simplified insurance” due to their straightforward underwriting process, saw the number of policyholders surge from 3.61 million in 2021 and 4.11 million in 2022 to 6.04 million last year. This was largely due to the pent-up demand from those with pre-existing conditions who had difficulty obtaining new insurance, as well as insurers diversifying their related products.

The simplified insurance market is expected to grow further reflecting this trend. As aging progresses and the population with underlying diseases increases, insurers recognize this market as a new opportunity. Recently, products that extend the disclosure period to reduce premiums have also been introduced, leading to further segmentation of offerings.

Most existing insurance products for policyholders with pre-existing conditions asked whether the applicant had received a disease diagnosis or medical examination within the past 3 months, hospitalization or surgery due to disease or injury within the past 5 years, or a diagnosis of one of the three major diseases within the past 5 years (known as 3·5·5 insurance). However, this year, products extending the disclosure obligation period to 10 years to lower premiums have been released one after another. Existing insurance for policyholders with pre-existing conditions typically has premiums 2 to 5 times higher than general insurance, but extending the disclosure period helps reduce premiums.

For example, Meritz Fire & Marine Insurance launched 'Meritz Simple 3·10·5 Health Insurance 2406' and 'Meritz Simple 3·10·5 Health Insurance (Ⅱ) 2406' in June. These products extend the hospitalization and surgery disclosure period from 5 years to 10 years. KB Insurance also introduced 'KB 5·10·10 (Otenten) Plus Health Insurance' and 'KB 3·10·10 (Samten Ten) Wise Simplified Health Insurance.' By adding a 'health disclosure' to the pre-contract notification obligation, customers can enroll at premiums up to 29% cheaper.

An industry insider explained, “Savings-type insurance, which had been the main product for insurers, is losing appeal as the low interest rate environment continues, and demand for whole life insurance?which has strong coverage characteristics for families?is also declining due to the increase in single-person households. Therefore, insurers are focusing on developing products suited to the new market environment.”

Strengthening Coverage and Eyeing the Digital Healthcare Market

As life expectancy lengthens, interest in health increases, leading to expanded coverage for various diseases and injuries that may occur in daily life. These insurances are classified as third insurance and can be handled by both life and non-life insurers, intensifying competition. The fact that these are protection-type insurances advantageous for securing Contractual Service Margin (CSM) under the new International Financial Reporting Standard (IFRS17) also plays a role.

For the past decade, the third insurance sector has been dominated by non-life insurers. Since the 2004 amendment to the Insurance Business Act allowing non-life insurers to handle third insurance, their market dominance has grown, currently holding about 70% market share. Life insurers are actively working to regain this leadership. For example, the proportion of health insurance in new contract CSM for Samsung Life Insurance, the industry leader, increased from 31% in the first half of last year to 42% in the second half, and 54% in the first half of this year. This indicates a shift from traditional whole life insurance to third insurance products as part of a structural transformation.

Additionally, new services utilizing digital technology related to health are being actively developed. Examples include health management services through digital devices and customized insurance design using big data. KB Insurance has already established 'KB Healthcare' in 2021 as one of its core new businesses focusing on healthcare. Samsung Life Insurance collaborated with the sleep tech startup ‘A-Sleep’ to launch a sleep analysis service on its comprehensive health management platform ‘The Health.’