Insurance market growth in Korea is expected to recover to 2.1% in 2023 from 0.7% in 2022 with total premiums projected at over KRW 232 trillion, according to an outlook report released by the Korea Insurance Research Institute in October 2022. The life insurance market is forecast to return to positive growth in 2023 after a sharp contraction in 2022, but the life market will likely be surpassed by the non-life market in terms of premium volume. The non-life insurance market will continue to grow, but its growth will be moderating 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 rising inflationary pressure. 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.
The life insurance market is expected to rebound in 2023 after declining for two years in a row, with premium income forecast to grow by 0.3% to KRW 114.6 trillion in 2023. When retirement annuity premiums are excluded, however, the expected growth rate is down to minus 0.3%. Savings life insurance premiums are projected to fall by 3.4% as life insurers will continue to focus on selling protection products, but the pace of contraction will be tempered compared to the previous year. Although rising interest rates on bank deposit products have made savings insurance look relatively less attractive, some life insurers will likely pivot toward high-guaranteed rate savings products to take advantage of interest rate hikes so that they can boost their revenues and assets.
Variable life savings insurance is also faced with some headwinds. As the stock market is slumping amid concerns over economic downturns, sales of variable insurance have tumbled, and the surrender rate has increased, with premium income expected to decline by 6.9% in 2023. 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 2.3% 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. However, economic weakness will have a negative impact on insurance sales growth as fewer consumers will have extra money to spend on insurance.
Life annuity premiums will continue to shrink as life insurers are struggling with the challenges of longevity risk management and stronger capital requirements under new accounting standards. Still, increasing life expectancy is the primary driver that increases the demand for annuity plans, and rising crediting rates may lead to a renewed interest in annuities with an increasing number of baby boomers hitting retirement age.
The non-life insurance market has been demonstrating greater resilience over the last few years, and its premium volume is expected to grow by 3.9% to KRW 118.1 trillion in 2023. 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 3.7% in 2023, with total premiums of KRW 100.8 trillion.
Long-term insurance is projected to grow by 4.8% in 2023, 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 1.1%, due to the recent premium rate reduction. 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 5.9% in 2023, and solid growth momentum will come from the casualty lines of business backed by liability insurance while the growth of marine and surety insurance will slow down. Fire insurance premiums are anticipated to grow by 1.2% amid growing demand from households and factories, while positive growth will be maintained for marine insurance thanks to increasing trade flows and shipbuilding orders.
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 2.4% growth in retirement annuity in 2023, while retirement annuity premiums of non-life insurers are expected to grow by 5.0% on the back of premiums from in-force policies as well as new business drives by a few insurers.
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.