With South Korean life insurers coming under intense pressure due to stagnating sales amid challenging business environment and increasing claims due to coronavirus (Covid-19) outbreak, the country’s life insurance market is set to decline by 1.2% from KRW112.3 trillion (US$96.0 billion) in 2019 to KRW110.9 trillion (US$92.3 billion) in 2020, according to GlobalData, a leading data and analytics company.

An analysis of GlobalData’s Global Insurance Database reveals that South Korea’s life insurance business is set to grow at a compound annual growth rate (CAGR) of 0.9% during 2019-2023 against the previous estimate of 2%.

Deblina Mitra, Insurance Analyst at GlobalData, comments: “South Korean life insurers are facing a challenging business environment with stagnancy in sales. The recent lockdown restrictions due to Covid-19 outbreak will further prevent new sales through insurance agents. As a result, new business premiums which were already facing a declining trend, could now drop even further.”

Low interest rate is another challenge for South Korean life insurance industry. Insurers have already been struggling to sell products with guaranteed returns, which are very popular in the country. With the central bank reducing benchmark rates to 0.75%, it will further worsen insurers’ position on these products, ultimately impacting their sales.

Mitra concludes: “Life insurers could see a rise in claims in 2020 due to the Covid-19 outbreak as life insurance policies do not contain an exclusion for pandemics. As a result, business outlook for 2020 looks challenging for life insurers in South Korea with increasing pressure on profitability and decline in sale of new products.”