Insurance's 'Corona Paradox'... Premiums Increased as the Crisis Spread

Growing Awareness of 'Health Crisis'
Life Insurers' Premium Income Up 3.5% from Jan to May
Decrease in Life Insurance Cancellations Too

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] The insurance industry, which was expected to experience 'negative growth,' has encountered a 'paradox of COVID-19' as insurance premium income increased amid the novel coronavirus disease (COVID-19) crisis. Since COVID-19 spread domestically, it has served as an opportunity to newly recognize health risks, leading to increased demand for insurance coverage.

According to statistics from the Life Insurance Association on the 5th, the cumulative insurance premium income of domestic life insurance companies from January to May this year reached 32.05805 trillion KRW. This is a 3.5% increase compared to 31.4444 trillion KRW during the same period last year.

First-year insurance premium income, for policies less than one year since subscription, increased significantly. The first-year premium recorded 1.398 trillion KRW in January, exceeded 5 trillion KRW in March when COVID-19 began spreading nationwide, and reached 8.7371 trillion KRW in May. This is a 26.2% surge compared to 6.9196 trillion KRW during the same period last year. On the other hand, insurance premium income for policies in their second year or beyond was 23.8434 trillion KRW, down 681.4 billion KRW (2.7%) from last year.

During the same period, cancellations of life insurance policies also decreased. From January to May, the number of life insurance cancellations slightly dropped from 2,368,786 cases last year to 2,364,563 cases this year.

Non-life insurance is showing similar trends. In the first quarter, the net premiums written by domestic non-life insurance companies amounted to 22.1174 trillion KRW, a 7.4% increase compared to 20.5745 trillion KRW in the same period last year. This exceeds the 3-4% increase in automobile insurance premiums in January.

Sharp Increase in Health Insurance and Variable Insurance Searches in March-April

Even considering the recent frequent 'insurance remodeling,' where customers cancel existing policies and re-subscribe to new ones when new insurance products are introduced, the increase in insurance premium income during the COVID-19 period is considered unusual by the industry.

The cause of the increase in premium income can be found in the restructuring of the life insurance market toward protection-type insurance. Life insurers, preparing for the introduction of the new International Financial Reporting Standard (IFRS 17), have reduced sales of savings-type insurance and actively shifted their focus to protection-type insurance, coinciding with consumers' growing interest in health insurance.

Additionally, as the stock market fluctuated due to COVID-19, demand for variable insurance also increased. According to the report titled 'Changes in Individual Insurance Consumer Demand Due to COVID-19' published by the Korea Insurance Research Institute, search volumes for health insurance and variable insurance surged sharply in March and April during the COVID-19 outbreak.

The report analyzed, "The spread of infectious diseases is expected to expand individuals' awareness of health risks," and "The increase in search volume for health insurance during the COVID-19 outbreak supports this."

However, concerns remain that the increase in premium income may be a 'short-lived boon' limited to the first half of the year. A life insurance industry official said, "Life insurers entering the protection-type insurance market may end up sharing the market pie with non-life insurers who have traditionally sold protection-type insurance," adding, "Although premium income increased during the COVID-19 period, it is uncertain whether this trend will continue in the long term."

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