"Whole Life Insurance Market Growing, Reaching 29% Market Share"

[Asia Economy Reporter Changhwan Lee] The proportion of whole life insurance in the domestic life insurance market is steadily increasing.

According to the Insurance Research Institute's report "Trends and Implications of the Whole Life Insurance Market" on the 18th, the premium income of whole life insurance has shown continuous growth, increasing by 12.8% and 9.7% in 2015 and 2016 respectively, and growing by 3.2% in 2020.

The share of whole life insurance within individual insurance, which was 23% in 2010, also rose to 29% in 2021.

The report analyzed that the main reason whole life insurance has recently established itself as a key growth driver in the life insurance industry is that under newly introduced systems such as IFRS17 and K-ICS, whole life insurance is advantageous compared to savings-type insurance due to its lower interest rate fluctuation risk.

Since around 2014, life insurance companies have actively developed new products to expand demand for whole life insurance and reduce sales of savings-type insurance, as the expansion of savings-type insurance liabilities under new market valuation systems like IFRS17 and K-ICS could increase capital volatility.

By year, the increase in new whole life insurance products in 2015 was achieved through the development of pension advance payment type whole life insurance, which integrates the growing demand for retirement income protection due to aging. In 2016, the launch of living expense advance payment type whole life insurance expanded the functions of whole life insurance.

From 2019 to 2020, the main products sold were (non-)surrender value guaranteed whole life insurance products that had been launched since 2016. These products stood out for their advantage of yielding higher returns than savings-type insurance if the policyholder does not surrender early in a low-interest-rate environment.

Between 2020 and 2021, many simplified enrollment whole life insurance products (available to elderly and those with pre-existing conditions) developed since early 2017 were released, although their numbers remain fewer compared to advance payment type or (non-)surrender value guaranteed whole life insurance.

However, since whole life insurance is a product designed to prepare for the risk of economic hardship caused by the loss of the primary earner’s future labor income upon their death, factors such as overall mortality improvement, increase in one- to two-person households, and income diversification through dual earners have weakened demand for whole life insurance.

In particular, concerns about insufficient explanations and potential damages from early surrender during insurance companies’ expansion strategies for whole life insurance have led regulatory authorities to continuously implement consumer protection measures for new whole life insurance products.

The report pointed out that life insurers need to maintain a balance between "improving profitability" and "supplying products desired by consumers," analyzing diverse consumer demands such as death benefit needs, retirement health needs, retirement income needs, and savings and investment needs, and providing suitable product groups accordingly.

It also added that to expand the scope of protection-type insurance in the long term, it is necessary to actively discover new consumer protection needs.

Kim Sejung, a research fellow at the Insurance Research Institute, stated, "Insurance companies are already paying attention to areas such as long-term care and health management services as alternatives to respond to the slowdown in growth of protection-type insurance," adding, "Although visible results have not yet appeared, continuous interest from a long-term perspective is necessary."

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