The life insurance industry is showing signs of increasing policy cancellations. As economic slowdowns and reduced consumer spending lead to more contract terminations, the decline in new contracts raises concerns about growth potential in the sector. Structural factors such as low birth rates and an aging population are expected to further limit the growth of existing products, prompting insurers to seek new growth drivers.
According to the insurance industry on August 2, the policy cancellation payouts from 22 life insurance companies reached 5.9197 trillion won in May, a 79.7% increase from 3.2947 trillion won in the same month last year.
Since recording 6.0522 trillion won in January, the amount of policy cancellation payouts has exceeded 5 trillion won each month through May. Cumulatively, the payouts reached 28.9704 trillion won by the end of May, up 39.2% from 20.8171 trillion won during the same period last year.
The increase in policy cancellations is attributed to a combination of changes in consumer financial management and worsening living conditions. The domestic stock market's strong performance in the first half of the year has led to a 'money move' phenomenon, where funds tied up in existing insurance products are being redirected to investments like stocks. Additionally, high inflation and economic slowdown have increased households' need for cash.
Alongside the rise in policy cancellations, the slowdown in new contract inflows has heightened concerns about the weakening growth foundation of the life insurance industry. The cumulative number of new contracts for life insurers in the first half of the year was 4,112,902, a 12.9% decrease from 4,719,407 in the same period last year. If the trend of existing contract cancellations continues alongside a decline in new contracts, it could lead to a reduction in the number of active contracts, undermining long-term profitability.
Industry insiders believe that traditional insurance sales alone will struggle to secure growth momentum due to low birth rates, an aging population, and economic slowdown. As a result, life insurers are accelerating efforts to restructure their business portfolios, focusing on new growth areas such as overseas investments, senior care, and healthcare.
An industry official stated, "For customers to increase their disposable income, their capacity to purchase insurance must also expand. However, recent consumer conditions have been challenging, weakening the competitiveness of core insurance operations. Given the current market conditions, significant growth in the insurance sector seems unlikely, prompting insurers to concentrate on discovering new growth drivers in overseas investments, senior care, and healthcare."
* This article has been translated by AI.
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