"Low Growth Expected Next Year... Insurance Premium Sales Forecast to 'Stall'"

Korea Insurance Research Institute Holds Seminar on Insurance Industry Outlook and Challenges
New Norms: 'High Inflation, High Interest Rates, Low Growth'
Insurance Premium Sales Growth Slows
"Increased Volatility Makes Crisis Management Crucial"

As the domestic and international economies continue to experience low growth amid high interest rates and high inflation next year, a decrease in household excess savings is expected to negatively impact insurance demand. Given the high level of uncertainty, the insurance industry is analyzed to need to further strengthen soundness and asset risk management.

On the 5th, the Korea Insurance Research Institute held a seminar titled "Insurance Industry Outlook and Challenges" at a hotel in Yeouido, Yeongdeungpo-gu, Seoul, targeting CEOs of insurance companies, academia, and related institutions.

Senior Research Fellow Yoon Seong-hoon, who gave the first presentation that day, predicted that the global economy will move away from the previous low growth, low interest rates, and low inflation environment and face even lower low growth amid high interest rates and high inflation starting next year. He analyzed that a new equilibrium state of lower low growth than before the COVID-19 shock will be established. Yoon stated, "Various latent factors such as rising international oil prices, worsening climate change, sustained high interest rates, a hard landing of the Chinese economy, and accelerated decline of globalization coexist, which could expand difficulties."

The impact of this situation on the insurance industry is also expected to be significant. Jo Young-hyun, head of the Financial Market Analysis Office at the Korea Insurance Research Institute, forecasted in his presentation "2024 Insurance Industry Outlook and Challenges" that insurance demand will shrink as household excess savings decrease due to high inflation and high interest rates. According to the Korea Insurance Research Institute, insurance premium sales of insurance companies in 2024 are expected to increase by 2.6% compared to the previous year.

In particular, the growth rate of life insurance is estimated to be only 0.6%. This is because disease and health insurance and retirement pensions are expected to grow, but savings-type insurance is projected to experience negative growth. On the other hand, the growth rate of gross written premiums in non-life insurance is forecasted at 4.4%. Although this is slower than this year's growth rate of 6.7%, it is more than seven times the growth rate of life insurance companies. Growth is expected across long-term non-life insurance, general non-life insurance, and retirement pensions.

Regarding the "first-year premium," which is the initial premium paid after subscribing to insurance, it is expected to reach around 9.9 trillion won in 2024, a 22.0% decrease compared to this year. The decline in first-year premiums for life insurance was steeper at 24.8% (excluding retirement pensions and general group insurance). First-year premiums for non-life insurance (long-term non-life insurance) are expected to grow by 3.3% compared to this year.

Meanwhile, both life and non-life insurance companies are expected to continue the growth of the profitability indicator introduced under the new accounting standard IFRS17, the Contractual Service Margin (CSM). According to the Korea Insurance Research Institute, the CSM for the life insurance industry is about 61.9 trillion won this year and is expected to reach 69.9 trillion won next year. The non-life insurance industry (based on 11 companies) is also projected to record a CSM of 64.6 trillion won this year and 67.9 trillion won next year.

While insurance profits will increase as the CSM grows, caution is advised due to the high volatility of investment profits. Since countries began tightening monetary policies in 2022, profitability gaps between companies have widened, and this trend may continue next year as high interest rates persist. Jo emphasized, "As financial market volatility increases, the scale of a company's profits will vary depending on its investment profit and loss management capabilities. Companies with weakened soundness should maximize internal retention of profits and further strengthen asset risk management."

Jo Young-hyun, Head of Financial Market Analysis at the Korea Insurance Research Institute, is giving a presentation at the Insurance Industry Outlook and Challenges Seminar held on the 5th in Yeouido, Yeongdeungpo-gu, Seoul. (Photo by Korea Insurance Research Institute)

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