South Korea life insurance to see hefty boost in coming years
South Korea life insurance to see hefty boost in coming years | Insurance Business Asia
Life & Health
South Korea life insurance to see hefty boost in coming years
What will be the primary driver for the segment’s growth?
Life & Health
By
Kenneth Araullo
The South Korean life insurance sector is projected to experience a compound annual growth rate (CAGR) of 5.6% between 2023 and 2027, with direct written premiums (DWP) rising from KRW205.3 trillion ($154.2 billion) in 2023 to KRW255.4 trillion ($191.2 billion) in 2027, according to research from analytics firm GlobalData.
GlobalData also indicated that the South Korean life insurance market is anticipated to grow by 4.4% in 2023. This growth will be primarily fuelled by shifting demographics, characterized by low birth rates and a rapidly aging population, leading to increased demand for pension, long-term care, and whole-life insurance policies.
“The aging population (aged 65 or more) in South Korea, which accounted for 17.5% of the total population in 2022, is expected to reach 20% by 2025, according to Statistics Korea. The rise in the older population will have a significant impact on the demand for long-term savings life insurance products,” GlobalData insurance analyst Prasanth Katam said.
Growth across all segments
Pension insurance is the largest segment in South Korea’s life insurance market, expected to grow by 7% in 2023 and accounting for a 36.5% share of DWP. Supplementary pension insurance policies are noted to be popular among individuals seeking to bolster their retirement savings, and government tax incentives further incentivize investment in this area. Pension insurance is predicted to achieve a CAGR of 8% between 2023 and 2027.
Endowment insurance, the second-largest segment, is projected to hold a 14.4% share of DWP in 2023, with expected growth of 12% in that year. These policies offer comparatively high interest rates than other financial instruments like bank deposits, making them attractive investment options. Endowment insurance is forecast to experience a CAGR of 7% over the 2023–27 period.
Whole life insurance is estimated to contribute a 13.2% share of DWP in 2023 and is expected to grow at a CAGR of 3.1% from 2023 to 2027. The aging population in South Korea is a key driver of demand for whole life insurance, as the median age is projected to increase from 44.5 years in 2023 to 56.5 years by 2050, resulting in increased demand for such policies. Additionally, insurers are enhancing protection elements and inclusivity in whole life insurance plans.
“The South Korean life insurance industry is a developed market with a high penetration rate of 9.2% as compared to other regional countries like Japan (6.1%), India (2.9%), New Zealand (1.3%) and Australia (1.1%). Low fertility rates and a rapidly aging population will help in maintaining a modest growth in the life insurance industry over the next five years,” Katam said.
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