Non-life insurers in Korea saw their business portfolio mix change slightly over the past ten years, with the share of long-term insurance increasing. When retirement annuities are excluded, their business portfolios consist of three lines of business, i.e. long-term, motor, and general P&C. A recent study by the Korea Insurance Research Institute shows that between 2010 and 2020, the portion of long-term insurance increased from 60.1% to 64.9% of the total non-life insurance business portfolio, while the share of motor insurance decreased by 3.8%p to 22.7%. There was a 1.0%p decrease in the share of general P&C insurance, which includes fire, marine, guarantee, and casualty.
*Excluding retirement annuities
(Source: Korea Insurance Research Institute)
The shifts in the non-life business portfolio mix have been driven by changing insurance demand and insurers’ business strategies. There has been growing demand for long-term health and personal accident coverage in step with rising life expectancy. Insurers have also changed their marketing strategies and product offerings in response to the upcoming introduction of IFRS 17, which will reduce the accounting mismatch between assets and liabilities and seek a more market-consistent balance sheet. They focused on marketing long-term protection insurance instead of savings insurance in order to improve their risk profile.
Mid-sized insurers experienced greater changes in their portfolios compared to their larger peers. The share of long-term insurance among mid-sized insurers increased significantly over the ten-year period, while they saw the portion of motor insurance fall sharply. By contrast, larger insurers maintained a relatively stable portfolio mix, with a slightly greater share of motor insurance and modestly larger shares of long-term and general P&C compared to ten years earlier.
It has probably been easier for larger insurers to increase their motor insurance market shares because they are in a better position to provide good-quality claims services based on their strong claims handling resources. Their aggressive strategies to utilize online distribution channels may also have undermined the business of mid-sized insurers.
The share of general P&C insurance has remained mostly stable at 12-13% of the total non-life insurance business excluding retirement annuities, but that is likely to increase going forward on the back of economic development and exposure growth. Changing industrial structure and climate change are also creating a more complex and riskier business landscape, generating greater insurance demand. The insurance industry is thus being increasingly called on to play a bigger role in promoting sustainable economic growth by helping businesses manage and mitigate industrial risks.