Trouble hits New York Life, ING

By Kang Seung-woo

Foreign insurance firms are facing a myriad of problems ranging from a soured bottom line to the defections of experienced hands, apparently forcing at least one to consider calling it a day.

According to sources in the insurance industry, New York Life Insurance is likely to sell its Korean subsidiary within this year.

The Korea operations of New York Life Insurance posted a net loss of 73.7 billion won ($62.65 million) and 43.6 billion won in 2008 and 2009 respectively.

ING Life Insurance has been plagued by loss of human resources.

In the first half of this year, 100 employees including five branch managers left the firm and joined Mirae Asset Life Insurance, while around 80 insurance planners bolted for another firm.

To make their situation worse, their market share has been on the decline.

According to the Financial Supervisory Service (FSS), the foreign insurers’ market share stood at 20.8 percent as of the end of December 2009, down 0.7 percent points compared to a year earlier.

“Prudential and ING have led the life-insurance sector and ING adopted a growth-focused strategy, with the selling of pension products. But after the financial turmoil, it is being restructured,” said Lee Chul-ho, an analyst of Korea Investment and Securities.

The situation for non-life insurers is not much different.

The FSS announced last week that foreign non-life insurers reported their net loss expanded to 85.9 billion won in the fiscal year that ended at the end of March, which compared with a 10.8 billion won loss in the previous year.

They accounted for only 1.96 trillion won, or 4.5 percent in the local insurance market, down from 4.8 percent a year ago.

It was the first time for their share to decline since 2001 when their Korean businesses began in full swing.

“Last year, the long-term non-life insurance market skyrocketed, but foreign insurers did not deal with such products and their market share dropped,” the FSS said.

Lee also said that their plans are not good enough to attract customers.

“They heavily depend on auto insurance, so if the car industry is sluggish like last year, they can be hit hard again,” he said.

He expects that the current situation will continue, especially in the life insurance area.

“Customers bought policies from them, being partially curious about their foreign brands and long reputation of the mother firms but it has been tough to do so since the financial fiasco that hit them hard, taking away their attractive points,” Lee said.