The Korean insurance market is expected to remain consistently stagnant in 2019 amid slowing economic growth and decreasing sales of savings insurance. Following a 0.2 percent decline in 2018, premium income is projected to shrink by 0.7 percent year on year to KRW 200.5 trillion in 2019.
It will be the third year in a row that the market has contracted. Both the life and non-life markets are losing growth momentum, but the contraction of a mature life sector is set to further deepen, weighing on overall premium growth.
The life insurance market is forecast to suffer a decline of 3.4 percent in 2019 due to weakening sales of both protection and savings policies. With credited interest rates going downward again after some rises, life insurers are less compelled to sell
savings policies. As the financial market has become increasingly volatile, the variable savings insurance sector also took a hit. As a result, life insurers are expected to see a 10.7 percent decrease in savings insurance premiums in 2019.
The growth of protection policies is expected to slow down to 1.9 percent in 2019 from 2.5 percent in 2018 due to slackening demand for whole life insurance and increasing policy surrenders amid a slowing economy. The expansion is still driven by life insurers’ new business strategies focused on protection products that are less capital intensive
under IFRS 17 and a new solvency regime called K-ICS, which are scheduled to be introduced in 2022. The market is also being boosted by rising demand for healthcare coverage products. In particular, there has been a jump in sales of dementia insurance and simplified issue policies for people with pre-existing conditions.
The retirement annuity market continues to grow, albeit at a slower pace. Major drivers of growth are an increase in the minimum funding level for defined benefit plans and stronger wage growth.
From January 2019, the minimum funding requirement was raised from 80 percent to 90 percent of the assets required. Premium income from retirement annuities is expected to increase by 5 percent in 2019.
Premium growth of non-life insurance is forecast to be 2.6 percent in 2019. Despite some recovery in the motor insurance sector, the overall market is slowing down due to falling sales of long-term savings insurance and the continued slowdown in annuities.
General property and casualty (P&C) insurance is expected to grow by 4.9 percent, backed by guarantee and casualty lines of business. The motor insurance market has started to recover in the wake of price increases driven by rising loss ratios, and its
growth rate for 2019 is expected to be 1.5 percent.
A contraction in savings insurance premiums continues to cause long-term lines of business to slow down. Premium income from savings insurance is expected to decline for the seven consecutive years in 2019 mostly due to reduced tax incentives for savings products and strengthened solvency regulations that encourage more capital efficient products. However, steady demand for long-term accident and disease coverages is expected to bolster the overall market, with long-term insurance
premiums forecast to grow by 2.7 percent in 2019.