According to the insurance industry on June 9, the total payout refunds from 22 life insurance companies reached 17.84 trillion won at the end of the first quarter, a 29.7% increase from 13.76 trillion won during the same period last year. Analysts attribute this rise to consumers seeking cash through refunds rather than maintaining coverage amid high inflation and economic downturn.
New contracts are also on the decline. The total number of new individual insurance contracts at the end of the first quarter fell to 3,094,295, a decrease of 3.9% compared to the previous year. The total value of new contracts dropped from 51.9 trillion won to 46.21 trillion won, a decline of 11.0%.
Life insurers reported an insurance profit of 1.07 trillion won in the first quarter, down 7.5% from 1.16 trillion won in the same period last year, largely due to losses from investment performance.
Facing challenges in their core business, insurers are also experiencing restrictions in their lending operations. The government's stringent household loan management policies have extended beyond banks to include the second financial sector, affecting insurance companies as well.
Major insurers have reduced the loan limits on products that previously allowed borrowing up to 90% of the payout refund to a 10 percentage point decrease since April. This change primarily affects whole life insurance, endowment insurance, and savings insurance.
Insurance policy loans allow policyholders to borrow against their accumulated payout refunds without credit checks or income verification, making them a popular source of emergency funds. As of the end of the first quarter, the outstanding balance of insurance policy loans stood at 71.4 trillion won, accounting for 53.1% of total household loans from insurers.
However, financial authorities have expressed concerns that insurance policy loans could be used as a means for "debt investment" in stocks or virtual assets, prompting calls for enhanced internal controls.
While insurance policy loans do not constitute a large portion of overall insurer revenue, the combination of declining new contracts and increasing cancellations is worsening the operating environment for insurers. The contraction in lending operations further diminishes their ability to defend profitability.
An industry insider stated, "The government's tightening of household loan management is extending beyond banks to the insurance sector, slowing growth in lending operations. With declining new contracts and increasing cancellations weakening core profitability, restrictions on lending could further increase the operational burden for some insurers."
* This article has been translated by AI.
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