Business Results of Insurers in Korea for the First Quarter of 2018
For the first quarter of 2018, life insurance companies in Korea reported KRW 26.1 trillion in premium income, down 8.7 percent from a year earlier, according to the Financial Supervisory Service (FSS). New business premiums fell by 37.6 percent to KRW 2.6 trillion for the first three months of the year as sales decreased in most lines of life insurance except for variable life products. Although new business premiums have been on the decline since 2016, new business counts have remained steady at around 5.1 million because sales of savings policies, whose premiums are relatively high, have been down while there has been an increase in new business for protection-type life insurance, which is smaller in premiums.
A breakdown of new business premiums by line of business shows that savings insurance accounted for 40.5 percent (KRW 1,058.7 billion) of the total new business premiums for the first quarter of 2018, compared to 64.4 percent in the first quarter of the previous year. Life insurers have been encouraged to readjust their business portfolios in a way to reduce the portion of savings policies due to the adoption of the International Financial Reporting Standard (IFRS) 17 scheduled for 2021. The implementation of IFRS 17 will pressure them in terms of capitalization as they will be required to measure their insurance liabilities at current interest rate values and set aside higher levels of reserves. Diminished tax benefits and sales commission for savings insurance also contributed to the reduction in sales of such products.
<Life Premium Income >
<New Business Counts>
(Source: Financial Supervisory Service)
New business premiums for protection-type products dropped by 22 percent year on year to KRW 350.2 billion because the saturation of the whole life insurance market and increased competition in the health insurance sector led to the decline in sales. However, their share rose to 13.4 percent from 10.7 percent as savings insurance sales dipped more sharply.
Variable insurance sales were up by 35.9 percent to KRW 741.2 billion in new business premiums thanks to a solid performance of the stock market and an increase in single-premium policies. Meanwhile, new business premiums for retirement annuities declined by 6.3 percent to KRW 463.7 billion. The portions of variable insurance and retirement annuities were 28.4 percent and 17.7 percent respectively.
By distribution channel, bancassurance remained the biggest channel, making up 54.4 percent of the total new business premiums, followed by individual agents (22.9 percent), direct marketing (14.8 percent) and agencies (7.1 percent).
<New Business Premiums by Line of Business>
*Individual figures may not add up to the total shown due to rounding. (Source: Financial Supervisory Service)
Non-life premiums expanded by 1.1 percent to over KRW 17.6 trillion for the January - March period of 2018, backed by general property and casualty (P&C) insurance premiums. Sharp increases in personal accident and casualty businesses led the general P&C sector to record a 14.6 percent growth in premium income to KRW 1,130.4 billion.
Motor insurance premiums fell by 0.2 percent to KRW 3,844.1 billion amid fierce price competition among insurers following a decrease in loss ratio in 2017. The contraction in premium income was also attributable to the expansion of the online motor insurance market where consumers can obtain cheaper insurance quotes.
Long-term insurance premiums also increased by 0.4 percent to KRW 12.6 trillion, supported by protection policies. As the sales of savings insurance policies plunged, new business premiums for long-term insurance dropped by 28.8 percent to KRW 307.1 billion.
Agencies accounted for the biggest share (46.1 percent) of the total premium income, followed by individual agents (26.8 percent), direct marketing (17.7 percent), bancassurance (8.0 percent) and brokers (1.2 percent).
The level of market concentration decreased slightly, with the combined market share of four largest non-life insurers dropping by 0.3 percentage point to 70.9 percent. They saw their market share increase in general P&C and motor insurance but decline in long-term insurance.
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