Korea Investment & Securities maintained its stance on expanding its focus on the insurance sector on the 5th. This is based on the judgment that the factors explaining the recent rise in insurance sector stock prices are not one-time events but rather long-term structural changes. It was analyzed that the rise in government bond yields, particularly in long-term bonds, positively influenced investment sentiment in accordance with the government's confirmed fiscal policy direction.
Hong Ye-ran, a researcher at Korea Investment & Securities, noted, "There are three main items directly related to the insurance sector in the Democratic Party of Korea's policy pledge. These include protection of policyholders' rights, stabilization of health insurance finances, and alleviation of medical expense burdens, as well as improvements in corporate governance." She explained, "Among these, the introduction of optional agreements for actual loss insurance coverage under the protection of policyholders' rights is a positive issue for non-life insurance companies."
The main point of the pledge is to guarantee the contracts of first and second generation actual loss insurance, while introducing an option to reduce premiums when policyholders choose to exclude unnecessary treatment items from coverage. Researcher Hong said, "If the option is introduced, a reduction in unnecessary medical utilization is expected primarily for initial actual loss insurance," adding, "Thus, along with the reform of actual loss insurance, a positive effect on the improvement of the loss ratio for non-life insurance companies is anticipated in the medium to long term."
She added, "Controlling excessive medical expenses and strengthening the management system of the prices of non-covered medical services are also in line with the ongoing efforts to enhance non-covered management," and noted, "There is a high possibility that the insurance payouts will decrease when services like physical therapy and extracorporeal shock wave therapy transition to covered services."
Researcher Hong concluded, "Lastly, in terms of the restructuring of corporate governance, I believe it is an issue that requires a long-term approach." She said that in the short term, stock prices are rising primarily for companies with a high share of treasury stocks, but a re-rating of stocks with high visibility and sustainability in shareholder return policies is expected later. She also mentioned that, due to the recent amendment of the insurance business law, the possibility of restructuring governance in the Samsung Group is being brought back into focus.
She continued, "The creation of conditions for rising interest rates and expectations for easing capital regulations are also positive factors," explaining, "The government's supplementary budget of approximately 30 trillion won for the second half of this year is expected to be primarily funded through the issue of deficit bonds, and the resulting rise in market interest rates is a factor that will improve the capital ratios of insurance companies."