Loose social safety net drives Koreans to private underwriters

By Choi Sung-jin

Koreans paid 3.4 million won or more on average in insurance premiums the past year, a foreign research organization says.

According to Sigma, published by the reinsurance company Swiss Re, Koreans paid on average about 3.44 million won ($3,034 at the then exchange rate) between April 2015 and March 2016, the 18th highest amount in the world.

The per capita payment of insurance premiums was highest in the Cayman Islands with $12,619, followed by Switzerland ($7,370), Hong Kong ($6,271), Luxembourg ($5,401), Finland ($4,963) and Denmark ($4,914), the magazine said.

Over the past year, Koreans on average paid $1,939 in life insurance premiums and $1,094 in nonlife insurance premiums. The nation’s per capita insurance premium payment rose nearly 800,000 won from 2.64 million won ($2,332) in 2010 with its ranking also going up five notches from 23rd place.

All this means that Koreans are paying an undue amount for insurance considering their country’s economic power, experts said.

In the comparison of “insurance penetration” – payment of insurance premiums against gross domestic product – Korea ranked at sixth place with 11.42 percent, 1.8 times higher than the global average of 6.23 percent. The five countries with insurance penetration ratios higher than Korea’s were the Cayman Islands (20.24 percent), Taiwan (18.97 percent), Hong Kong (14.76 percent), the South African Republic (14.69 percent) and Finland (11.86 percent). Japan came in seventh with 10.82 percent.

Korea’s insurance penetration rate also edged up from 11.09 percent in 2010. Industry experts attribute it to poor social welfare conditions, which forces people to increase their insurance expenditures to prepare for their retirement.

Accordingly, the Korean market’s total premium income reached about 174 trillion won ($153.6 billion), up 4.8 percent in the past year to become the eighth largest in the world.

The United States has the largest insurance market with premium income of $1.31 trillion, chased by Japan ($449.7 billion), China ($386.5 billion) and the United Kingdom ($320.1 billion).

Local experts said Korean’s payments of large sums for insurance premiums compared with the nation’s economic size is attributable to their “survival-on-my-own” mentality reflecting the nation’s poor social safety net.

“As livelihoods get shakier and the public security system weaker, Koreans are paying too much to prepare for future uncertainty,” said Oh Geon-ho, a civic activist. “The nation needs to expand its public safety net by increasing the national pension and health insurance in which employers and employees share more of the financial burden.”