[Becoming an Insurance Insider] If COVID-19 Resurges... Will It Be a Gain or a Setback for Insurers?

Increase in Insurance Premium Income Despite COVID-19 Impact in First Half
Decrease in Large Hospital Usage... Reduced Vehicle Operation
Continued Contraction of Face-to-Face Channel Sales Amid COVID-19 Resurgence

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On the 28th, citizens are waiting to get tested at the COVID-19 screening clinic in front of Nowon-gu Public Health Center in Seoul, where the government has extended social distancing level 2 in the metropolitan area for another week. Photo by Honam Moon munonam@

[Asia Economy Reporter Oh Hyung-gil] In the first half of this year, insurance companies, whose face-to-face sales were restricted due to the COVID-19 pandemic, succeeded in defending their performance despite difficulties. It is evaluated that the reduction in hospital visits and refraining from going out due to COVID-19 led to decreased vehicle usage, which positively affected the overall performance of insurance companies.

However, as COVID-19, which had entered a stable phase, shows signs of re-spreading after the Seoul rally on Liberation Day, the insurance industry is forecasting an uncertain outlook for the second half of the year. Is the re-spread of COVID-19 a benefit or a disaster for the insurance industry?

Last year, both life insurance companies and non-life insurance companies saw their premium income increase side by side.

According to the Financial Supervisory Service on the 30th, life insurers' premium income was 54.1619 trillion KRW, an increase of 1.9159 trillion KRW (3.7%) compared to the same period last year. Bancassurance sales of single and short-term savings insurance through banks showed strong performance.

Non-life insurers' gross premiums also recorded 47.8135 trillion KRW, up 2.9223 trillion KRW (6.5%) from the previous year, driven by the popularity of long-term personal insurance and driver insurance.

Net profits are also evaluated to have held up well.

Non-life insurers' net profit was 1.7156 trillion KRW, a 15.5% increase compared to the same period last year, while life insurers' net profit was 2.0727 trillion KRW, a 2.6% decrease from the previous year.

The Financial Supervisory Service explained, "The increase in non-life insurers' net profit was mainly due to improved profitability of automobile insurance caused by reduced outings and activities due to COVID-19, and increased investment income from the disposal of financial assets." It also evaluated that life insurers recorded favorable performance despite difficulties in face-to-face sales due to COVID-19.

Experts also analyze that the reason insurance companies achieved good performance despite COVID-19 is because of COVID-19 itself.

Kim Se-jung, a research fellow at the Korea Insurance Research Institute, stated in the report "Changes in Activity Related to COVID-19 and the Insurance Industry," "In the first half of the year when COVID-19 was spreading, traffic volume, medical utilization, and personal mobility sharply declined," and interpreted, "As a result, loss ratios of automobile insurance, health, and disease insurance temporarily improved, and the sales environment of face-to-face channels deteriorated."

He added, "The decrease in automobile usage due to the spread of COVID-19 likely temporarily reduced the frequency of automobile accidents, and a significant increase in the number of registered vehicles also showed a positive effect on premium growth. Medical utilization, especially in general hospitals, significantly decreased, and the reduction in non-essential medical use likely contributed to the improvement of loss ratios in health and disease insurance and personal automobile insurance."

[Image source=Yonhap News]

If COVID-19 Re-spreads, Face-to-Face Sales Will Be Virtually Impossible

Recently, the number of confirmed COVID-19 cases is approaching 300 again, increasing the possibility of re-spread. The government has implemented the last 'all-out defense' by raising social distancing to level 2.5 and strengthening quarantine measures.

The insurance industry anticipates that if COVID-19 re-spreads, activity changes related to the insurance industry similar to or more severe than those in the first half of this year may recur. They also evaluated that the insurance companies' response capabilities could have a significant impact.

Research fellow Kim said, "Despite the expected deterioration of the sales environment in face-to-face channels, the first premium performance of the agent channel in the first quarter continued to show favorable growth," adding, "This is because the reduction in the assumed interest rate offset the negative environmental changes caused by the spread of COVID-19."

He continued, "Previously, automobile usage showed a temporary decrease followed by recovery during the spread of COVID-19, while medical utilization and personal mobility showed relatively persistent declines," emphasizing, "If COVID-19 re-spreads, the decrease in automobile accident frequency may be temporary, but the contraction of the sales environment in face-to-face channels may be sustained."

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