Insurance Market Shrinks Amid Debt Investment Trend

Amid an economic downturn and declining consumer sentiment, life insurance sales are experiencing a general slowdown. This trend is exacerbated by a growing demand for debt investment, known as "debt-to-investment" (빚투), as the stock market thrives. Notably, banks are increasingly focusing on investment products, leading to a significant drop in insurance sales.
According to the insurance industry on June 28, the number of new contracts from 22 life insurance companies from January to April this year totaled 2,908,054, a decrease of 9.4% (or 302,456 contracts) compared to the same period last year, which saw 3,210,510 contracts.
Excluding the one-time effects of employee channels, the decline in bancassurance sales is particularly pronounced. During the same period, new bancassurance contracts fell from 182,947 to 102,913, marking a 43.7% decrease (or 80,034 contracts), the highest drop among major sales channels.
The decline in bancassurance sales has also led to a significant reduction in new contract premiums. Bancassurance new contract premiums (excluding lump-sum payments) dropped from 107.2 billion won last year to 50.4 billion won this year, a decrease of 52.9% (or 56.8 billion won). This figure exceeds the overall decline in new contract premiums, which totaled 35.7 billion won.
The financial sector reports a general decline in insurance demand, with noticeable changes in product sales through bank branches. In the past, inquiries about stable insurance products were common, but recently, there has been a growing interest in financial products with strong investment characteristics during consultations.
In fact, the sales of exchange-traded funds (ETFs) by the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) reached 56.73 trillion won as of June 21, a tenfold increase from 5.21 trillion won during the same period last year.
As the insurance market struggles with slow new entries, there is also a rapid increase in policy cancellations. By the end of the first quarter, the surrender value of 22 life insurance companies reached 17.84 trillion won, a 29.7% increase compared to 13.76 trillion won in the same period last year. This trend is attributed to a growing demand for cash, even if it means canceling insurance contracts.
An industry insider noted, "The recent diversification of investment alternatives has contributed to the decline in insurance demand through bancassurance. In periods of strong investment environments like the stock market, consumers tend to favor liquidity or investment potential over long-term financial products."

* This article has been translated by AI.