Insurance CEOs "Expect Net Profit Next Year... Trust and Innovation Remain Challenges"

KIRI 'Insurance Company CEO Survey'

Insurance company CEOs expect net profits to increase next year despite the challenging economic environment, driven by new product development and securing competitiveness in sales channels. However, their continued focus on short-term profitability was identified as an issue that needs improvement in consumer trust and insurance innovation.

The Korea Insurance Research Institute released the "2024 Insurance Company CEO Survey" report on the 5th, which surveyed insurance company CEOs on economic outlook, management indicator expectations, insurance industry evaluation, and management strategy formulation. The survey was conducted from August to September 2024, with 34 out of 44 insurance company CEOs (77%) responding. Among the respondents, 18 were CEOs of life insurance companies and 16 were CEOs of non-life insurance companies.

Insurance company CEOs generally had a negative outlook on South Korea's economy next year. They predicted that Korea's economy would slightly worsen compared to this year due to expanding household debt and political uncertainties in major countries. More than half of the respondents (18) forecasted a "slight deterioration," followed by "similar" (9) and "slight improvement" (7). Regarding long-term interest rates (10-year government bonds), 76.5% of respondents (27) expected rates to be lower at the end of next year than they are now.

Despite the difficult economic environment, the insurance sector is expected to continue strong performance. Twenty insurance company CEOs responded that net profit would increase by 0-10% next year, and nine CEOs anticipated a 10-30% increase. One CEO expected an increase of more than 30%. However, four CEOs expressed concerns that net profit could decrease by about 10% compared to this year. Additionally, about 80% of respondents (27) stated plans to manage the solvency ratio (K-ICS) at a level between 151% and 250%.

However, only one CEO rated consumer trust in the insurance sector as high. Insurance company CEOs identified insurance product sales practices (12), insurance claim payment practices (8), and consumer understanding of insurance (6) as factors affecting consumer trust. Furthermore, the level of innovation in the insurance industry was generally rated as low. Domestic business focused on sales competition (11), lack of autonomy due to regulation (11), and uncertainty in profit generation (6) were cited as major causes hindering insurance innovation.

Nonetheless, the insurance sector appears to focus more on short-term profits rather than long-term business model transformation. Insurance company CEOs showed low interest in long-term profitability such as new business initiatives, while placing high priority on insurance sales activities like new product development and securing competitiveness in sales channels. In particular, by selecting health insurance (life insurance) and long-term personal insurance (non-life insurance) as core products, competition within the health insurance market is expected to intensify further.

A representative from the Korea Insurance Research Institute stated, "To enhance consumer trust and innovation in the insurance industry, it is necessary to move away from sales-centered competition and establish a growth foundation from a long-term perspective, as well as to consider business model transformation. Current management strategies may improve profitability in the short term, but it is difficult to continuously generate demand in a limited market, which could have negative long-term effects on the insurance industry."