General insurance business in South Korea to stagnate in 2020 due to COVID-19, says GlobalData

South Korea’s general insurance industry is expected to stagnate in 2020, with growth declining to 0.7% in 2020, as compared to the 2.8% in 2019, according to GlobalData, a leading data and analytics company.

GlobalData has revised the South Korea’s insurance forecast in the aftermath of the global coronavirus (COVID-19) outbreak. As per the latest forecast, South Korea’s general insurance market is set to grow at a compound annual growth (CAGR) rate of 2.4% during 2019-2023.

Pratyusha Mekala, Insurance Analyst at GlobalData, comments: “The export-led South Korean economy contracted by 1.4% in the first quarter of 2020, as compared to the previous quarter. Contraction in key sectors like manufacturing and international trade is expected to heavily impact insurance sales of motor and marine, aviation and transit (MAT) business lines.”

South Korean automotive sector is also grappling with severe supply chain disruption due to its dependence on China. According to the Korea Automobile Manufacturers Association, about US$34bn could be needed to restore business operations over the next three months. This will result in decline in Auto sales further impacting motor insurance premiums.

The recent lockdown restrictions have also impacted sales through distribution channels like bancassurance and agents, which accounts for over 50% of industry premiums. While online channels are witnessing higher growth, overall industry sales will be impacted.

Mekala concludes: “Despite decline in premium collections, profitability in the general insurance business may not get equally impacted due to lower expected claims. Motor insurers are expected to register lower claims due to the restricted mobility while Health insurers are expected to face lower claims due to the predominant role of public healthcare in the current outbreak.”

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