Insurance Industry Must Double Profits to Meet Market Expectations

Korea Insurance Research Institute,
'Impact and Challenges of the Insurance Industry in the Zero Interest Rate Era' Online Seminar

[Asia Economy Reporter Ki Ha-young] An analysis has emerged that the insurance industry needs nearly double the current profits to meet market expectations.

On the afternoon of the 16th, the Korea Insurance Research Institute held an online seminar titled "The Impact and Challenges of the Insurance Industry in the Zero Interest Rate Era" and announced this. Researcher No Geon-yeop of the Korea Insurance Research Institute presented on the topic "Profitability and Response Measures of the Insurance Industry," stating, "The insurance industry needs 1.9 times the current profits to satisfy market-required returns." This amounts to 4.7 trillion won.

Researcher No estimated that considering investors' required rates of return on insurance companies, life insurers need to generate 2.1 times, and non-life insurers 1.5 times the net income as of the end of 2019. Actual net income of insurance companies is at its lowest level in the past decade. Since 2017, there has been a downward trend, and the return on equity (ROE) has fallen to one-third of what it was ten years ago.

Following this, Oh Eun-sang, head of Mirae Asset Life Insurance, gave a presentation titled "Business Environment and Product Strategy in the Zero Interest Rate Era," emphasizing the need to change the framework of the insurance business. He said, "To prepare for the zero interest rate era, efforts are needed to change the insurance business framework, including expanding special account products such as variable insurance and foreign currency insurance, diversifying risk protection, introducing healthcare services, and predicting changes in insurance demand."

In the discussion session, Ko In-cheol, managing director of DB Insurance, said, "To faithfully fulfill the role of the insurance industry as a social safety net, products and services that meet customer needs in this changed era must be provided," adding, "A paradigm shift in management and risk control to prepare for the zero interest rate era is urgently required." He emphasized, "The direction of this shift is strengthening financial soundness centered on asset-liability management (ALM) and innovating the profit structure centered on insurance margins."

Yoon Young-gyu, managing director of Kyobo Life Insurance, said, "A strategy to respond to profitable new contracts should start from the customer's perspective as a demander rather than the company as a supplier, with attempts to meet diverse customer needs," adding, "At the same time, efforts to change negative customer perceptions of insurance products must accompany this."

Professor Lim Chang-won of Soongsil University expressed concern, saying, "Insurance companies should refrain from increasing net income through bond disposal gains, and the sale of low-surrender and no-surrender whole life insurance may become a burden for insurance companies in the future."

At the opening remarks, Ahn Cheol-kyung, president of the Korea Insurance Research Institute, emphasized, "Currently, the insurance industry is entering a degrowth society, and it is difficult to expect a return to past business models, so it is necessary to adjust the business model in a direction that improves profitability and enhances sustainability."

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