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제목 Revised Outlook for the Korean Insurance Market in 2022

Revised Outlook for the Korean Insurance Market in 2022

In 2022, insurance market growth in Korea is expected to slow down to 1.2% from 2.1% in 2021 with total premiums projected at KRW 229.1 trillion, according to a revised outlook report released by the Korea Insurance Research Institute in July 2022. The life insurance market is forecast to continue contracting, while non-life insurance growth will be moderating further amid weakening economic growth prospects. Since Russia’s invasion of Ukraine in February 2022, the economy has been losing recovery momentum. Besides, consumer spending is likely to be affected by the latest uptick in new COVID-19 cases in July and August. As economic strength will have a direct impact on insurance market growth, insurance companies will need to keep a weather eye on economic conditions such as inflation, GDP growth, household indebtedness, and global supply chain issues.

 

 

 

 

Life Insurance

The life insurance market is expected to decline for two years in a row, with premium income decreasing by 1.9% to KRW 116.5 trillion in 2022. When retirement annuity premiums are excluded, the expected growth rate is further down to minus 3.6%. General savings insurance premiums are projected to fall by 7.2% because of reduced sales through the bancassurance channel. Rising interest rates on bank deposit products have made savings insurance look less attractive, although a large number of savings policies come into maturity in 2022, and some of the policyholders who get maturity benefits are expected to buy new savings insurance.  Back in 2012, there was a rush to buy general savings insurance before the tax changes that became effective in 2013, resulting in a year-on-year growth of 85% in savings insurance premiums in 2012.  

Variable life savings insurance is also faced with some headwinds. As the stock market is slumping, sales of variable insurance have tumbled and the surrender rate has increased, with premium income expected to decline by 17% in 2022. Despite a growing interest in investment products, the demand for variable savings insurance is likely to decline due to higher financial market volatility.

On the other hand, premiums from protection-type insurance are forecast to grow by 3.7% because sales of health insurance remain robust. The COVID-19 pandemic has become a driving force behind rising risk awareness and demand for health insurance coverage. This will provide a greater boost to insurers’ marketing initiatives to sell protection-type products in the run-up to the implementation of IFRS 17 and K-ICS. Reduced social distancing measures will also help improve sales from the face-to-face distribution channel.

Although increasing life expectancy is the primary driver that increases the demand for annuity plans, a rise in life annuity supply is likely to be restrained due to the challenges of longevity risk management and stronger capital requirements under new accounting standards.

 


 

Non-Life Insurance

The non-life insurance market has been demonstrating greater resilience over the last few years, and its premium volume is expected to grow by 4.6% to KRW 112.6 trillion in 2022. The growth will be supported by long-term personal accident and health insurance, general property and casualty (P&C) insurance, and retirement annuities. When retirement annuities are excluded, premium growth is forecast at 4.0% in 2022, with total premiums of KRW 97.1 trillion.

Long-term insurance is projected to grow by 5.2% in 2022, driven by personal accident and health insurance. Long-term savings insurance premiums are set to decline sharply as insurers remain focused on marketing protection products. The motor insurance market is projected to slow down further, growing by 1.3%, due to falling prices. The rise of usage-based insurance and online distribution channels usually offering lower prices is also putting downward pressure on premium income growth per policy.

General P&C insurance will remain a strong driver of growth, although it still accounts for a small portion of the entire non-life market. Its premiums are expected to grow by 6.8% in 2022, and solid growth momentum will come from the casualty lines of business while the growth of fire, marine, and surety insurance will slow down. Liability insurance will continue to boost the casualty market, which is expected to expand by 8.5%. Fire insurance premiums are anticipated to grow by 4.9% amid growing demand from households, while growth will be maintained for marine insurance thanks to increasing trade flows and shipbuilding orders.


Retirement Annuity

The retirement annuity market in Korea is on track to keep growing, as the demand for annuity products is rising amid a growing population of 65 years and older. However, the pace of growth is slowing because the effect of an increase in funding requirements for defined benefit plans has come to an end. Life insurers are anticipated to see a 4.4% growth in retirement annuity in 2022, while retirement annuity premiums of non-life insurers are expected to grow by 8.3% on the back of premiums from in-force policies.

Improving labor market conditions and the expansion of the individual retirement pension (IRP) sector are upside factors that drive the growth of the overall retirement annuity market. There are some downside factors for insurers, on the other hand, such as intensifying competition against other financial sectors and capital requirements for annuity reserves. Given that a large chunk of premium contributions are made at the end of the year, there is a higher level of uncertainty as to growth projections for the retirement annuity market.

 

 

 
 
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