24 Apr 2020
Posted in Coronavirus
Service sector collapse set to hit South Korea’s insurance sector, says GlobalData
South Korea has implemented one of the most effective responses to the coronavirus (Covid-19), but even it cannot avoid an economic downturn, which has seen GlobalData, a leading data and analytics company, to revise its forecast down. The total estimated size of South Korea’s insurance market in 2023 has been revised down by 4.3%. GlobalData revised down the country’s insurance market size from a CAGR of 2.6% to 1.8% for the period 2019-23.
Deblina Mitra, Insurance Analyst at GlobalData, comments: “With a downgraded credit rating outlook, South Korean insurers are facing a challenging time ahead, with significant anticipated risks to arise of an economic slowdown and supply chain disruptions linked to China.”
A prompt government response and rigorous testing has allowed South Korea to avoid a complete lockdown like most other countries. However, supply chain disruption from China and its own manufacturing sector has still suffered significantly.
Mitra adds: “The service sector accounts for 60% of the South Korean economy, so its decline will have a significant knock-on effect on the insurance market. Closures of hotels, restaurants and schools will reduce business premiums and impact the agricultural sector, and consequently insurance market, which has fewer markets to sell to.”
Insurers are attempting to continue existing policies by extending premium renewal terms and eliminating physical documents involved in the renewal process. However, life policies not containing pandemic exclusions means that death benefits are expected to see a significant rise, which will hit profitability.
Ben Carey-Evans, Insurance Analyst at GlobalData, concludes: “Insurers have to do everything possible to make it easy for customers to continue policies. Extending premiums renewal dates is a good idea, not many people or businesses will be able to afford further payments now. Digitalizing the process is an absolute must. It may also accelerate the process of moving from paperwork beyond the virus, as people get used to doing business digitally.”