South Korea’s life insurance industry is projected to grow at a compound annual growth rate (CAGR) of 2.8% from KRW116.6 trillion ($100.4bn) in 2021 to KRW133.7 trillion ($117bn) in 2026, in terms of direct written premiums (DWP), forecasts GlobalData, a leading data, and analytics company.
GlobalData expects the growth to be driven by product innovation as insurers look for ways to reduce the impact of persistent low-interest rates and adverse demographic trends.
Manogna Vangari, Insurance Analyst at GlobalData, comments: “A saturated market, an aging society, and low fertility weighed down on life insurance growth during 2017-2020. Demand for whole life and endowment products also suffered due to low-interest-rate and higher capital requirements that forced insurers to limit the sale of such products.”
To drive growth, insurers engaged in product enhancements such as the introduction of low-cost short-term life insurance products for a period of one year with a coverage of up to KRW50.0 million ($43,694.2) and ease of sales via online channels.
Term life insurance is the largest insurance line in South Korea with 37.6% share in 2020. It is expected to grow at a CAGR of 3.8% over 2021-2026, supported by increased awareness of mortality risks due to the COVID-19 pandemic.
Pension, the second-largest line, accounted for 33.1% share in 2020. It is expected to grow at a CAGR of 2.3% during the forecast period. Recovery in the job market post-pandemic coupled with an increase in minimum wage will aid its growth. Over the long-term, the government’s proposed pension reforms on raising premium rates and its plan to increase the retirement age from 60 years to 65 years will further contribute to growth in pension insurance.
Whole life and Endowment are the third and fourth-largest lines with a share of 14.8% and 14.5%, respectively in 2020. The demand for these lines is expected to recover in 2022 due to the postponement of the IFRS17 implementation regulation to 2023. The regulation, which was earlier expected to come into force from 1 January 2022, mandated insurers to set aside additional capital to sell savings-type products.
Vangari concludes: “Economic growth coupled with positive regulatory developments is expected to steer steady growth in the life insurance industry in South Korea over the next five years.”