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South Korea Insurance Report Q1 2012
Business Monitor International, Jan 2012, Pages: 90
Business Monitor International's South Korea Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on South Korea's insurance industry.
At first glance, South Korea looks like a typical North East Asian insurance market. High savings rates, government incentives for life insurance and underdeveloped financial markets have – over time – produced the existence of a life segment that is enormous by any standard. The leading life companies – Samsung Life, Korea Life and Kyobo Life – would rank as very large players in any country. Although substantial by most measures, the non-life segment is, in terms of the overall premiums written (and most other metrics) by far the smaller of the two. Although both segments have for years been open to entry by and competition from foreign groups, both non-life and life insurance is dominated by the affiliates of gigantic local conglomerates.
However, the factors that set South Korea’s insurance market apart from those of Hong Kong, Japan, China and Taiwan are equally important. In the first instance, premiums are growing steadily even though South Korea has become a rich country by most standards. This is partly because of recent legal changes which have boosted demand for particular lines (such as compulsory liability insurance for managers of public facilities). Double digit growth in demand for long-term products, at least some of which would in most other countries be offered by life companies, is boosting the premiums of the non-life companies. In the life segment, demand for annuities is being lifted by demographics (ie the ageing of the population) and/or success on the part of insurers in increasing the productivity of particular distribution channels. Finally, there are three aspects of the competitive landscape that BMI would emphasise. There are some national insurance markets surveyed by BMI where brutal competition has slashed prices and margins to very low levels. South Korea is not one of them. In Q311, the Fair Trade Commission (FTC), the country’s antitrust watchdog, levied fines totalling KRW365bn (US$315mn) on 12 life companies. The fines were penalties for collusion between 2001 and 2006, the result of which was that premium rates were inflated and payments to customers were compressed. In mid-2007, the FTC had, similarly, sanctioned a number of non-life companies for forming a cartel. Second, and in contrast to Taiwan (for example), South Korea is a country that foreign majors see as a significant opportunity. Manulife, for instance, has noted that South Korea is an obvious gap in its regional footprint. Finally, the conglomerates that are the owners of the largest insurance companies are often diversified industrial groups rather than multi-faceted financial services combines. This is another way in which South Korea differs from Taiwan or Hong Kong.
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