1 Trillion Gathered... Variable Insurance's 'Second Golden Age'

Profit from Stock Investment Boom
First Premiums Reach Half-Year High

[Asia Economy Reporter Oh Hyung-gil] Variable insurance is regaining popularity due to the stock investment craze and low interest rates. The initial insurance premiums (premiums paid by customers upon first enrollment) collected in the first half of this year have exceeded 1 trillion won.

As demand increases, insurance companies are continuously launching new products that address previous shortcomings, so the popularity of variable insurance is expected to continue for the time being.

According to the Life Insurance Association and the insurance industry on the 16th, the initial insurance premiums for variable insurance from 21 life insurance companies in the first half of this year recorded 1.0854 trillion won. This is a 31.8% increase compared to the same period last year and approaches the half-year record high of 1.1773 trillion won set in 2018.

Since January, when it recorded 200.7 billion won, funds of around 200 billion won have been flowing in every month. If this trend continues, it is expected to easily exceed 2 trillion won this year.

Mirae Asset Life Insurance, the number one variable insurance company, recorded initial insurance premiums of 521.8 billion won, chosen by half of the new subscribers. Prudential Life Insurance followed with 127.9 billion won, MetLife with 86 billion won, Hana Life Insurance with 69.8 billion won, and KB Life Insurance with 57.3 billion won.

The sharp increase in variable insurance is interpreted as a result of idle market funds flowing into the stock market. Variable insurance is an indirect investment product where a portion of the paid premiums is invested in stocks, bonds, etc., and the refund amount varies depending on performance. In other words, it is heavily influenced by the stock market. When the stock market rises, the yield on variable insurance increases, enhancing the product's competitiveness.

In particular, since the COVID-19 pandemic and the prolonged ultra-low interest rates, investment-type variable insurance has attracted attention. Variable whole life or variable annuities provide insurance money or pensions upon death, so there are stable mechanisms that limit the stock allocation ratio in asset management.

On the other hand, investment-type variable insurance can increase the stock allocation ratio to over 90%, and some products allow conversion to pensions for those aged 65 or older.

After the Lime Fund and Derivative Linked Fund (DLF) incidents, investment-type variable insurance has been intensively sold mainly through banks (bancassurance). In the case of Mirae Asset Life Insurance, 100% of the variable insurance sold through bancassurance in the first half was investment-type products.

Recently, products that reduce the risk of principal loss depending on the investment period have also appeared. Hana Life Insurance introduced a safe investment-type variable insurance product earlier this month that guarantees 100% of the paid premiums if the accumulation period exceeds 10 years, and 80% if within 10 years.

However, the subscription rate for variable annuity insurance remains low.

According to a survey conducted last year by Associate Professor Lee Kyung-hee of Sangmyung University targeting 7,074 insurance consumers, only 203 subscribed to variable annuity insurance, resulting in a subscription rate of just 2.9%. The subscription rate was lower among unmarried individuals compared to married ones, and women were more reluctant to subscribe than men.

Professor Lee advised, "In the case of unmarried women, unlike married women, the subscription rate increases with age, so this should be considered when establishing product sales strategies."

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