71% of Insurance CEOs Say "Inflation + Interest Rate Hikes... Recession Is Coming"

Survey of 38 Domestic Insurance CEOs: "Growing Concerns Over Economic Recession"

Domestic insurance company CEOs who held a meeting with Lee Bok-hyun, Governor of the Financial Supervisory Service, on June 30 (file photo) [Image source=Yonhap News]

[Asia Economy Reporter Changhwan Lee] A survey found that 7 out of 10 CEOs of domestic insurance companies view the possibility of an economic recession due to rapid interest rate hikes and inflation as high.

According to the results of the '2022 Insurance Company CEO Survey' conducted by the Korea Insurance Research Institute on the 12th, 71.1% of the 38 domestic insurance company CEOs who responded to the survey judged the possibility of an economic recession caused by inflation and rapid interest rate increases as 'high.' The proportion of CEOs who responded that the possibility of a recession is 'very high' also reached 15.8%.

Most CEOs who responded to the survey forecast that the inflation threat, which has been expanding since this year, is a short-term phenomenon that can be resolved within 1 to 2 years.

However, they judged that the current high inflation would undermine the growth potential and profitability of the insurance industry. The expansion of inflation could negatively affect the soundness and profitability of insurance companies through various channels such as insurance demand, insurance claim amounts, and operating expenses.

Rapid interest rate increases were also analyzed to have a negative impact on the growth potential of insurance companies. Rising interest rates adversely affect the financial soundness of insurance companies with high debt ratios.

Among CEOs of non-life insurance companies, concerns about the seriousness of moral hazard, such as frequent insurance fraud in automobile insurance or indemnity medical insurance, were also significant.

Regarding countermeasures against insurance fraud, responses strongly favored strengthening penalties for insurance fraud, improving the medical utilization appropriateness review system, and sharing information related to insurance fraud.

The new business areas focused on were mainly health-related sectors such as health care services, nursing, and long-term care services.

The main product strategies of life insurance companies for the next 2 to 3 years showed a high selection ratio of protection-type insurance such as health insurance and whole life insurance, but the proportion of pension insurance and variable insurance expanded compared to 2021.

The main product strategy of non-life insurance companies was long-term personal insurance, which accounted for the largest share at 46.2%, almost the same as in 2021, but preferences for long-term property insurance and liability insurance increased compared to 2021.

The preparation level for the new accounting standards IFRS17 and K-ICS, which will be introduced to the insurance industry next year, was generally self-assessed as progressing well. The proportion of responses indicating preparation levels above average rose by 4.6 percentage points from 77.0% in 2021 to 81.6% in 2022.

Regarding the question of how changes in the economic environment such as inflation and rising interest rates would affect the impact of the new system introduction, the proportions of negative and positive responses were similar.

An official from the Korea Insurance Research Institute stated, "This year's survey results show that insurance company CEOs focused more on short-term issues than last year due to rapid economic environment changes and the introduction of new accounting standards," adding, "In the negative conditions of unprecedented high interest rates and low growth, insurance companies need to concentrate on current issues such as product strategies, sales channel strategies, curbing insurance claim leakage, and managing operating expenses to maintain growth and profitability."

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