Insurance Company CEO: "South Korea's Economic Recovery Will Take at Least 2-3 Years"... Half Predict a U-Shaped Recovery

87% of Insurance CEOs Say "Korean Economic Recovery Will Take at Least 2-3 Years"
Biggest Threats: Decline in Investment Returns and Insurance Demand
Need to Lift Price Regulations and Revise Sales Channel Rules

[Asia Economy Reporter Ki Ha-young] Insurance company CEOs predicted that it will take at least 2 to 3 years for the South Korean economy, which has been contracted due to the novel coronavirus infection (COVID-19), to recover. They also identified the biggest threats to the insurance market as declines in investment returns and insurance demand. In particular, the emergence of new competitors such as online platforms like Naver and Kakao, known as the "catfish" of the financial market, was seen as a major threat.

On the 15th, the Korea Insurance Research Institute conducted a survey titled "Post-COVID Outlook and Challenges" targeting 28 CEOs of life and non-life insurance companies. The CEOs expected that it would take at least 2 to 3 years or more for the South Korean economy, weakened by COVID-19, to recover.

More than half (55%) chose a U-shaped path (gradual recovery over 2 to 3 years), while 32% anticipated a Nike-shaped path (slow recovery over a long period).

The main threats identified were a decrease in investment returns (41%) and a decrease in insurance demand (23%). Domestic small and medium-sized companies and some large companies cited a decrease in insurance demand as a threat, while foreign insurance company CEOs pointed to a decline in investment returns. Notably, 2 out of 10 (21%) diagnosed the emergence of new competitors such as online platforms as a threat.

On the other hand, opportunity factors included acceleration of digital financial transformation (48%) and expansion of new business opportunities such as healthcare (25%). CEOs who viewed insurance market restructuring as the biggest opportunity accounted for 18%.

After COVID-19, half of the CEOs selected non-face-to-face channels as the channels that need the most growth. Regarding products, both life and non-life insurance CEOs responded that they should focus on health insurance (or long-term protection insurance) and products linked to healthcare services.

Additionally, more than half of the CEOs said they would expand asset management strategies such as alternative investments, overseas investments, and long-term bonds. Regarding corporate bonds, there was a wide variation in investment strategies. In a low-interest-rate environment, the mainstream strategy appears to be expanding investments in long-term bonds (maturity over 10 years) to reduce interest rate risk, while also expanding alternative and overseas investments to improve yields.

Regarding urgent short-term management tasks, they selected ▲enhancing the use of new technologies (big data, artificial intelligence (AI)) (21%) ▲reorganizing sales channels (21%) ▲strengthening asset management capabilities (19%). For sustainable growth of the insurance industry, key long-term management tasks included ▲establishing new growth foundations (27%) ▲expanding digital infrastructure (24%) ▲restoring insurance trust (23%).

Major policy tasks that the government should focus on included ▲relaxing insurance premium price regulations (23%) ▲reorganizing sales channel regulations (22%) ▲strengthening the role of the social safety net (16%). In particular, life insurance CEOs viewed easing and smooth landing of financial soundness regulations as other key government tasks, while non-life insurance CEOs saw improvements in indemnity insurance and automobile insurance systems as priorities.

The Korea Insurance Research Institute diagnosed that "due to the prolonged spread of COVID-19, uncertainty in the insurance industry's management environment is increasing," adding that "negative factors that could undermine the growth, profitability, and soundness of the insurance industry, such as economic slowdown, ultra-low interest rates, and deterioration of face-to-face channel sales environments, are dominant."

This content was produced with the assistance of AI translation services.