An Effect of IFRS
Insurance sales through bancassurance dropped significantly in the first half of the year. The total initial premiums collected from new insurance contracts sold at banks and securities companies amounted to 3.41 trillion won (US$3.02 billion) in the first half of this year, a 33 percent drop compared to the same period last year. It was largely due to lower sales in savings type insurance products.
According to a report released by the Financial Supervisory Service (FSS) on Sept. 12, the total amount of initial premiums from life insurance and non-life insurance products sold through bancassurance channels amounted to 2.68 trillion won (US$2.37 billion) and 736 billion won (US$652.19 million), respectively, in the first half of the year. The premiums of life insurance dropped 1.57 trillion won (US$1.39 billion), or 36.9 percent, from a year earlier, while that of non-life insurance fell 136 billion won (US$120.51 million), or 15.6 percent, over the same period.
Insurance companies have been restructuring their sales portfolio by reducing the portion of savings type insurance ahead of the introduction of the International Financial Reporting Standards (IFRS) 17, which will take effect in 2021. Under the new accounting rule, insurance premiums on savings type products will be excluded from the revenue of insurance companies, which would make an insurer’s bottom line appear weaker.
Demand for savings type insurance products also went down as tax benefits for long-term one-time payment savings type insurance over 10 years has reduced from 200 million won (US$177,226) to 100 million won (US$88,613) from April last year.
By financial sector, banks, which account for the highest percentage in bankassurance sales with 66.4 percent, saw the initial premium of new insurance contracts stand at 2.26 trillion won (US$2.01 billion) in the first half, down 1.52 trillion won (US$1.34 billion), or 40.1 percent, from a year ago. This was because most of insurance products sold at banks were a savings type insurance. Accordingly, the income from related commissions also decreased 33.4 billion won (US$29.6 million), or 12.8 percent, to 227.4 billion won (US$201.51 million) compared to a year earlier. On the other hand, the figure of the National Agricultural Cooperative Federation (NACF), which mostly sells policy insurance products, such as crap insurance, came to 1.12 trillion won (US$990.52 million), down 163 billion won (US$144.44 million), or 12.7 percent, from the same period last year.
Meanwhile, there were 1,257 insurance agencies from financial institutions, including 1,134 firms from the NACF, 79 from savings banks, 20 from securities companies, 16 from banks and 8 from card firms. The nation’s first online-only bank K Bank was newly added at the end of last year.