A snapshot of the Life sector in South Korea, where the demographic changes of the last 30 years or so of modernisation, are coming home to roost.
The South Korean life insurance industry is forecast to grow at a compound annual growth rate (CAGR) of 5.6% over 2023–27, from KRW205.3 trillion ($154.2 billion) in 2023 to KRW255.4 trillion ($191.2 billion) in 2027, in terms of direct written premiums (DWP), according to GlobalData, a leading data and analytics company.
According to GlobalData’s Insurance Database, the South Korean life insurance industry is expected to grow by 4.4% in 2023. The growth will be driven by changing demographic factors such as low fertility and a rapidly aging population that has increased the demand for pension, long-term care, and whole-life policies.
Prasanth Katam, Insurance Analyst at GlobalData, comments: “The aging population (aged 65 or more) in South Korea, which accounted for 17.5% of the total population in 2022, is expected to reach 20% by 2025, according to Statistics Korea. The rise in the older population will have a significant impact on the demand for long-term savings life insurance products.”
Pension insurance is the largest life insurance line in South Korea and is estimated to grow by 7% in 2023, accounting for a 36.5% share in terms of DWP. As the national pension scheme provides a basic level of retirement income, people opt for supplementary pension insurance policies to augment their retirement corpus, driving the growth of the insurance line. Furthermore, the government’s tax incentives make pension insurance more affordable, which encourages people to invest in such products. Pension insurance is forecast to grow at a CAGR of 8% over 2023–27.
Endowment is the second largest life insurance line, accounting for an estimated share of 14.4% of the DWP in 2023. Along with life coverage, endowment insurance policies offer relatively higher interest rates as compared to other financial instruments such as bank deposits, which makes them an attractive investment alternative. Endowment insurance is forecast to grow by 12% in 2023.
Katam adds: “With a steady increase in gross household disposable income, which is forecast to increase from KRW1.2 billion ($1.1 million) in 2023 to KRW1.4 billion ($1.3 million) in 2027, and a growing awareness about financial planning after the pandemic, endowment insurance is expected to grow at a CAGR of 7% over 2023–27.”
Whole life insurance is estimated to account for a 13.2% share of the DWP in 2023. It is expected to grow at a CAGR of 3.1% over 2023–27, driven by the country’s aging population. According to United Nations Department of Economic and Social Affairs, the median age in the country is expected to increase from 44.5 years in 2023 to 56.5 years by 2050, which will drive the demand for whole life insurance policies.
The demand for whole life insurance policies is also witnessing an increase as insurers are redesigning these plans by enhancing protection elements and inclusivity.
Katam concludes: “The South Korean life insurance industry is a developed market with a high penetration rate of 9.2% as compared to other regional countries like Japan (6.1%), India (2.9%), New Zealand (1.3%) and Australia (1.1%). Low fertility rates and a rapidly aging population will help in maintaining a modest growth in the life insurance industry over the next five years.”