Foreign Insurers Actively Engage... "Korean Senior Care Market Must Follow"

Japan and China Already See Active Insurance Company Expansion
Direct Establishment and Operation of Care Facilities... Synergy with Insurance Increases
Korea Limited to Small Businesses... Qualitative Growth Needed

[Asia Economy Reporter Minwoo Lee] Although the proportion of elderly people is steadily increasing, there are concerns that the qualitative gap between domestic and overseas senior care markets, which provide nursing services for the elderly, remains significant. While Japan and China have seen both quantitative and qualitative growth in their markets due to active participation by insurance companies, domestic growth is still hindered by institutional limitations, making qualitative development difficult.

On the 23rd, Hana Financial Management Research Institute made this claim in its report titled "Overseas Senior Care Markets Led by Insurance Companies." According to the report, the size of the domestic senior care market is rapidly growing alongside population aging. The amount paid out under the Long-Term Care Insurance for the Elderly, which can gauge market growth, increased by about 16% annually from approximately 4.5 trillion KRW in 2015 to about 11.1 trillion KRW in 2021. The number of senior care service providers is also rapidly increasing, with around 5,000 elderly care facilities and 18,000 home care facilities operating nationwide.

However, qualitative growth remains slow. Since the Long-Term Care Insurance system was implemented in 2008, various issues such as unreasonable long-term care recognition procedures and fraudulent insurance claims have emerged, alongside growing dissatisfaction with services. Care workers also complain about poor income and job security.

The report identified the predominance of small-scale operators as a limiting factor. According to the 2019 Long-Term Care Survey by the Ministry of Health and Welfare, 75.7% of elderly care facilities are operated by individual business owners. Facilities with fewer than 30 users account for 60.7%. Seunghee Jeong, a researcher at Hana Financial Management Research Institute, pointed out, "Small operators struggle to invest in facilities due to lack of capital and find it difficult to secure excellent personnel, making it hard to improve service quality. From the perspective of supervisory agencies, it is virtually impossible to regularly evaluate and control the quality of services across the approximately 20,000 institutions."

Growth Achieved in China and Japan through Insurance Company Participation

Overseas, insurance companies are actively entering the market. Japan, which experienced population aging earlier than Korea, is a prime example. Japan entered an aging society (with over 7% of the population aged 65 or older) in the 1970s and became a super-aged society (with over 20% aged 65 or older) in the early 2010s. Insurance companies, seeking to diversify their revenue structures amid low growth and aging, have actively entered the senior care market. Major insurers include Sonpo Japan, Tokio Marine, and Nissay Life.

Researcher Jeong explained, "Japan initially faced side effects such as the proliferation of small operators and large-scale fraudulent claims, but later improved the system to encourage private sector participation, leading to qualitative growth. In particular, since private nursing care insurance is offered, the insurance industry, which can easily create synergies compared to other sectors, entered the market by acquiring and merging with previously underperforming care companies."

China, which is rapidly aging, is similar. As of 2020, China had 191 million people aged 65 or older, making it the country with the largest elderly population worldwide. To address the shortage of nursing facilities, the Chinese government has allowed private capital, including insurance companies, to establish nursing homes since 2010. Currently, several large insurers such as Taikang Insurance directly build and operate senior towns in major cities and closely link these with existing insurance businesses by selling products like the Silver Plan pension insurance.

Senior Care Demand Expected to Expand... "Institutional Improvements Needed to Encourage Insurance Company Entry"

The report forecasts that the types, methods, and scale of high-quality services demanded by the elderly will grow further. Especially, the baby boomer generation (born 1955?1974), with higher education and income levels, is expected to be dissatisfied with the current uniform services centered on care workers. To meet this demand, insurance companies will inevitably need to offer high-quality services. Currently, KB Insurance is the only insurer active in the domestic senior care market, having established and operated three care facilities since starting its care business in 2017.

Researcher Jeong emphasized, "It is necessary to ease regulations related to the establishment of care facilities to enhance insurance companies' ability to execute care businesses and strengthen the linkage with insurance products to create synergies with their core business. In particular, easing regulations on care facility construction, allowing in-kind service provision for nursing and dementia insurance, and considering tax benefits for nursing insurance premiums should be considered."

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