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| gettyimagesbank |
By Anna J. Park
Insurance experts in the country forecast a 2.1 percent year-on-year growth in premium income next year, due mainly to continuing inflation and recessional market sentiment stemming from increased uncertainties in macroeconomic factors.
Participants at a seminar hosted by the Korea Insurance Research Institute (KIRI) in Seoul, Thursday, called for local insurers to strengthen risk management, as inflation wreaks havoc on the insurance industry by reducing the real value of insurance contracts and increasing the amount of coverage.
"If the Korean economy goes through a recession, it will weaken the insurance sector's long-term growth," the research institute's senior analyst Kim Se-joong said during the seminar.
"It will harm the industry's growth rate and profitability, with the fall in insurance demand and the increase in termination of insurance plans. The increase of moral hazard would also negatively affect the sector's profitability with the rise of loss ratios. A possible delay in social agreements in the realm of pension reforms would impair the industry's long-term growth as well."
KIRI research director Kim Hae-sik stressed the need to strategically manage insurance companies' revenue from insurance plan holders' premiums payments, as they tend to be particularly vulnerable to rising inflation. Responding to complex layers of uncertainties facing the insurance sector next year, Kim advised local insurers to strategically redesign their business models' sustainability and expansion, while focusing to maintain risk management.
"Insurance companies are required to expand their scope of business, by closely linking with wealth management markets and fintech platforms," he said. He added that insurers need proactive strategies to respond properly to challenges posed by the adoption of new international accounting stands (IFRS17) and the spread of ESG-principled management.
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