The scale of life insurance surrender benefits is increasing. The rise in benefits, particularly for savings and variable insurance products, suggests a trend of funds moving from insurance to other financial products, commonly referred to as a 'money move.'
According to the Financial Statistics Information System (FISIS) on July 19, the surrender benefits of 22 life insurance companies in the first quarter of this year totaled 20.5259 trillion won, marking a 15% increase (2.6789 trillion won) compared to the same period last year (17.8469 trillion won).
In the general account, surrender benefits from savings insurance rose to 7.6494 trillion won, up 7.1% (508.9 billion won) from the previous year. Savings insurance products, which are often linked to interest rates, tend to react sensitively to changes in market interest rates and the yields of other financial products.
The insurance industry believes that the recent flow of funds has contributed to the increase in surrenders. With the domestic stock market performing well, interest in investment opportunities has grown, leading to a rise in demand for moving funds from relatively low-yielding savings insurance to riskier assets like stocks.
In the past, many policyholders utilized savings insurance as a long-term asset management tool due to stable interest rates and tax benefits. However, there is now a growing demand for direct investments in various products such as stocks, bonds, and funds, which has diminished the appeal of insurance products. In fact, the number of new contracts for savings insurance in the first quarter of this year was 98,652, a 17.6% decrease from the same period last year (119,761 contracts).
The increase in surrender benefits from special accounts was even more pronounced. In the first quarter of this year, surrender benefits from special accounts reached 5.3149 trillion won, a 44.9% increase (1.6469 trillion won) compared to the same period last year. Among these, surrender benefits from variable insurance amounted to 3.9057 trillion won, over 1 trillion won higher than a year ago. Variable insurance, which invests a portion of premiums in funds, combines both protection and investment features. During this period, surrender benefits from retirement savings also surged by 71.9% (454.2 billion won) to 1.0862 trillion won, indicating a growing demand for the termination of investment and savings-oriented products.
Even protection-oriented insurance, which primarily aims to cover risks from illness and injury, is seeing an increase in surrender benefits. In the first quarter, surrender benefits from protection insurance reached 7.5614 trillion won, up 7.4% (522.9 billion won) from the same period last year (7.0738 trillion won).
An industry official stated, "The recent increase in surrender benefits can be seen as a reflection of changes in living conditions and the money move resulting from a strong stock market. In particular, savings and variable insurance products have a strong investment nature, leading to a relatively high demand for reallocating funds to other investment opportunities based on market conditions."
* This article has been translated by AI.
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