Growth in whole life policies and savings-type policies, the flagship products of life insurance companies, is slowing. Whole life policies have lost popularity, and savings-type policies have seen profitability worsen since the introduction of the new accounting standard (IFRS 17) in 2023.
According to the Financial Supervisory Service on the 25th, the number of new whole life policy contracts at 22 life insurance companies operating in Korea was 1,527,509 from January to September last year, down 5% from the same period a year earlier (1,608,346). New contracts fell as the "short-pay whole life policy," which was popular in 2024, disappeared after the financial authorities applied the brakes.
A short-pay whole life policy is a product that refunds 120%–130% of the premiums paid if the contract is canceled in the 10th year after paying premiums for only five or seven years. As traditional whole life policies that pay benefits after the subscriber's death lost appeal, brief marketing pushed them as "whole life policies for money management."
Short-pay whole life policies have short premium payment periods, so premiums are expensive. As a result, while new contracts decreased, premium income rose 10.5% to 2.72941 trillion won from January to September last year, from 2.46950 trillion won a year earlier. Short-pay whole life policies help boost sales, but there is a high chance of losses after premiums are fully paid. An insurance industry official said, "At the time, there was a strong mindset to sell first for the numbers."
Savings-type policies, which played a big role in expanding life insurance company sales, are in decline. The number of in-force savings-type policy contracts at life insurance companies was 6,351,450 as of the end of September last year, down 4.74% from the same period a year earlier (6,667,197). This means more customers canceled or matured policies than newly signed up for savings-type policies.
Savings-type policies fell in the sales rankings after the introduction of the new accounting standard in 2023. Under the previous standard (IFRS 4), premiums for savings-type policies were recognized as revenue, but the new standard views much of the premiums as amounts to be returned to customers and recognizes them as a liability.
Since the new accounting standard, life insurance companies have been selling protection-type policies such as health insurance as their main products. As a result, business expenses, the costs of sales, are rising and competition is intensifying. In the insurance industry, people say, "All insurers in Korea are selling very similar products."