Chmn. Shin of Kyobo Life Insurance speaks at IIS Annual Seminar Leadership Panel held in Seoul
Chairman Shin Chang-jae of Kyobo Life Insurance
Co. at the 49th IIS Seoul Annual
Seminar Leadership Panel held on June 16-19 held at
Hyatt Hotel in Seoul. (photo courtesy of Kyobo Life)
Chairman Shin Chang-jae of Kyobo Life Insurance Co. said the life insurance industry in Korea saw a gradual increase in demand for annuity and health insurance products rather than death benefits over the years, meaning that the demand for the type of insurance is shifting from mortality/life insurance that helps surviving family members financially to protection insurance for individuals. He made the remarks at the 49th IIS Annual Seminar Leadership Panel held in Seoul on June 18, saying that he would like to make comments as a CEO of a Korean life insurance firm rather than from a global perspective.
The Korean insurance industry, as of March 2012 statistics, brought in premium income totaling $130 billion, the 8th largest in the world. For the past five years, it has been growing at an annualized rate of 9 percent to boost total asset value to $560 billion (50 percent of Korean GDP).
Chairman Shin said the current global insurance industry is faced with a highly uncertain environment mainly caused by the Eurozone crisis and delayed economic recovery in developed countries. In such circumstances, the future of the insurance business depends on how insurance companies as insurance service providers thoroughly understand and rapidly respond to changes of mid- to long-term insurance demand and the macro economy.
First of all, in order to understand the shifting demand for life insurance, one must look at the changing demographic structure, he said.
-A low birth rate and aging population, a trend that started in developed countries, is now a global concern. The low birth rate and aging population are areas of concern for the economy and especially for the insurance business, Shin said.
As reference, the chairman showed that in Korea, it took seven workers to support one senior citizen in 2010, but in 2036, 25 years from now, it is projected to be two workers for one senior citizen.
-In Korea, the birth rate for the year 2012 stood at 1.3, which is in the lowest in the world, and the speed of population aging is also one of the fastest in the world.
-Birth rate: U.S. (1.93) UK (1.98) France (1.99) Japan (1.39) OECD average (1.74)
-Move from aging to aged society: France 115 years, U.S. 73 years, Korea 18 years.
-Single person households increased from 9 percent in 1990 to 23.9 percent in 2010.
Shin said the national level of protection only works if “borrowing from the next generation” is possible; however, if the low birth rate and aging population continue to accelerate at the current rate, borrowing from the next generation may not be as easy, and this will weaken the role of the nation in terms of guaranteeing protection.
The chairman, who made the remarks in answer to the question, “Who will play the key role in protecting people from the risks in their lives?” Specifically, national, corporate and private/individual-who will play the main role? He also noted that the sovereign debt crisis of major nations will weaken the fiscal capacity of the government, further diminishing the role of protection by the nation.
Therefore, the key role of protecting people from risks in their lives will likely be played by individuals or the private sector, Shin said.
The prospect for the future of the insurance business depends on how rapidly insurance service providers handle the challenges of the changing demographic structure such as low birth rate and an aging population, as well as the deteriorating macroeconomic environment and fiscal capacity, Shin continued.