South Korea’s insurance industry is expected to face slower growth in terms of premiums next year, mainly due to low interest rate trends, slow economic growth and the aging Korean society, a report said Tuesday.
According to the report by Im Jun-hwan, director of the research, planning and coordination at the Korea Insurance Research Institute, the premium growth rate at Korean insurance companies is likely to fall to 2.2 percent next year from 3.2 percent this year. It was 5.5 percent in 2015, the report showed.
By type of insurers, life insurance firms will see their growth of premiums fall to 1.7 percent next year from 2.7 percent this year, it said. Fire and casualty insurance companies will see their premium growth drop to 2.9 percent from 3.8 percent during the same period.
By type of products, savings plans are expected to make a 2 percent contraction in terms of premiums this year and a further 1.2 percent shrinkage next year, the report said. Retirement plans will manage to maintain 1 percent premium growth this year but the growth will be reversed to a 1 percent contraction next year, it said.
“The demand for insurance policies is falling due to low economic growth linked with the aging society and low interest rates,” Im said in the report.
While low interest rate trends continue, the local insurance industry has been shedding jobs in recent years to reduce fallouts from worsening profitability.
The number of employees at insurance firms marked 59,444 in June, the lowest in five years, according to data by the Financial Supervisory Service.
Local insurers are also bracing for tougher regulations on their financial health in the coming years as Korea plans to adopt phase II of the International Financial Reporting Standards in 2020. The new accounting standard will require insurers to increase their capital bases.
To deal with worsening market conditions, Im urged local insurers to come up with a new management evaluation system and a better compensation system for employees.
By Kim Yoon-mi (email@example.com