Growing Global Insurance Market: Why Is South Korea Lagging Behind?

South Korea’s insurance market has exhibited a decline contrary to this global trend

In 2023, the global insurance market experienced notable growth following the COVID-19 pandemic, driven by economic recovery. However, South Korea’s insurance market has exhibited a decline contrary to this global trend. This blog post explores the factors driving the growth of the global insurance market, the reasons behind South Korea's lag, and future prospects.

Global Insurance Market Growth

In 2023, the total global insurance premiums reached $7.186 trillion, a 6.1% increase from the previous year. Both life and non-life insurance sectors saw growth, with life insurance up 3.9% and non-life insurance up 7.6%. Key factors contributing to this growth include economic recovery, a resilient labor market, easing inflation, and continued interest rate hikes.

The life insurance sector benefited from increased demand for savings and retirement products due to rising interest rates. In the non-life insurance sector, higher interest rates and premium rate increases were the primary drivers of premium growth. According to Insurance Research Institute's Maeng Ju-hee, "In developed countries, high interest rates have led to increased demand for savings products, while emerging markets have seen growing demand for retirement products due to expanding middle classes."

Decline in South Korean Insurance Market

In contrast, South Korea's insurance market experienced a decline. In 2023, total insurance premiums in South Korea were $185.9 billion, a 3.2% decrease from the previous year. Notably, the life insurance sector saw a significant drop of 10.8%, the largest decrease among major countries. The insurance industry attributes this decline to a base effect from the surge in single-premium savings insurance sales in 2022.

A representative from the life insurance industry explained, "In 2022, we saw a large increase in single-premium savings insurance due to liquidity needs and tax benefits. As a result, the 2023 insurance premiums were comparatively lower." Additionally, the market secured substantial premiums through short-term whole life insurance and protection products, making it difficult to compare growth rates by just comparing premiums from two consecutive years.

Future Outlook

The global insurance market is expected to continue growing in 2024. With the ongoing global economic recovery and sustained high interest rates, the market is projected to reach $7.6 trillion. Maeng Ju-hee predicts, "Considering the high demand for savings products in the life insurance sector due to high interest rates and the hard market conditions in the non-life insurance sector, we estimate a 6% growth for the global insurance market in 2024."

However, whether South Korea can align with this global growth trend remains uncertain. The South Korean insurance industry must swiftly adapt to market changes and find new growth drivers.

While the global insurance market is thriving, South Korea's market is facing challenges and declines. Various factors, including base effects and changing market conditions, have influenced this trend. Looking ahead, the future seems promising for the global market. It will be crucial for the South Korean insurance industry to effectively respond to these challenges and enhance its competitiveness in the global arena.