Life insurance sales are steadily contracting. New life insurance contracts fell by double digits in the first half of this year, as demand for new policies declined amid a shrinking population driven by low birthrates and an aging society, along with saturation in insurance subscription rates.
According to monthly sales statistics from the Korea Life Insurance Association released on the 3rd, the number of new life insurance contracts in the first half of this year totaled 4,112,902, down 12.9% from the first half of last year. New contract premiums also fell 6.8% over the same period to 744.37 billion won.
The overall decline in new contracts was largely driven by weak sales of protection-type insurance. In the first half of this year, new protection-type insurance contracts totaled 3,869,319, down 13.4% from a year earlier, far exceeding the decline in savings-type insurance (-3.6%). New contract premiums also fell 5.9% to 632.07 billion won.
Protection-type insurance is typified by whole life insurance, which covers death, illness, or injury, as well as health and disease insurance. Life insurers have aggressively expanded sales of protection-type insurance to secure contractual service margin (CSM), a form of future profit, since the introduction of the new international accounting standard (IFRS17). This is because protection-type insurance is more favorable to accounting profitability than savings-type insurance.
But the market was not what it used to be. The base for new subscriptions shrank due to population decline from low birthrates and aging, while new demand itself fell as insurance subscription rates had already reached high levels. The burden of premiums amid an economic slowdown has also been cited as a factor making consumers hesitant to sign up. Analysts also attribute the slowdown in protection-type insurance sales to the base effect from sales competition that had centered on short-term-payment whole life insurance and health insurance, combined with insurers shifting their sales strategies toward profitability.
Protection-type insurance sales also contracted on a first-year premium basis. From January to April this year, first-year premiums for individual protection-type insurance totaled 489.2 billion won, down 22.0% from 627.2 billion won a year earlier. First-year premiums for whole life insurance, the flagship product, fell 11.3% from 264.5 billion won to 234.6 billion won, while disease insurance fell 20.4% from 97.8 billion won to 77.9 billion won.
"Life insurance already has a high subscription rate, and new subscribers continue to decline due to low birthrates and aging," an insurance industry official said. "The fact that consumers feel burdened by signing up for long-term protection-type insurance that requires monthly premiums amid the economic slowdown has also affected the decline in sales."
The slump in the core business is also affecting earnings. In the first half of this year, net profit in the insurance divisions of the five major financial holding companies totaled 1.118 trillion won, shrinking 21.0% from a year earlier. Shinhan Life's net profit fell 15.6% to 290.6 billion won, and KB Life fell 20.4% to 150.6 billion won, while ABL Life's net profit dropped 48% due to factors including worsening insurance income.
Amid this situation, the life insurance industry is accelerating efforts to find new breakthroughs. Its strategy is to actively pursue mergers and acquisitions (M&A), which allow it to secure existing contracts and customer bases all at once, while diversifying investment income sources through expanded overseas investment. Samsung Life Insurance, Hanwha Life Insurance, Kyobo Life Insurance, and Heungkuk Life Insurance are considering the acquisition of KDB Life, whose main bidding is scheduled for the 7th of this month. The deal is seen as an alternative to overcome stalled growth, as it allows a buyer to secure existing contracts, customer bases, and managed assets at once.
Overseas investment is also expanding. Samsung Life Insurance recently reincorporated its New York and London subsidiaries as affiliates. This is groundwork for expanding overseas corporate investment and alternative investment.
