Insurers in Korea have turned dramatic demographic change into an opportunity to grow the senior market. Now the industry must move beyond selling life insurance to deliver solutions to meet the long-term needs of the elderly, argues RGA's Kyeonghwa Kim in a new research paper written for RGA Leaders of Tomorrow, an exclusive program of the International Insurance Society (IIS).
Over the past few decades, South Korea has witnessed remarkable economic growth, emerging as the eighth-largest global life insurance market in gross written premiums.
By 2025, Korea is expected to become a super-aged society, with the elderly population aged 65 and above exceeding 20% of the total population. This rate of aging is unprecedented, not just in Asia but worldwide.1 This new demographic paradigm shift has created significant challenges for many financial institutions, but also presents new opportunities for insurance innovation, particularly in senior-related offerings. Insurers that proactively prepare for and respond to these demographic shifts will be well-positioned to capitalize on the growth opportunities
In the face of these dramatic demographic changes, the role of insurance companies is becoming increasingly important. The Korean insurance industry has responded to the pressures of an aging society by developing various new products targeting seniors, such as simplified underwriting (UW) products and dementia/long-term care (LTC) insurance. Among these, simplified issue (SI) insurance is considered one of the most successful products targeting seniors in Korea. SI products helped the Korean insurance industry overcome its low-growth crisis in the mid-2010s.
However, since 2020, intense competition in the life and health market has led to cheaper and more aggressively priced SI products entering the market. This has had unintended consequences, including existing SI policyholders switching to these new offerings. Furthermore, overheated competition has resulted in shorter product life cycles and reduced profitability.
In 2000, only 11% of the population was aged 65 and older. However, by 2023, this proportion had risen to 18%. Projections from “Statistics Korea” suggest that by 2060, an astonishing 44% of South Korea’s population will fall into this age group. This demographic shift underscores the need for insurers to adapt offerings to cater to the unique needs of an aging society.
Source: Statistics Korea (https://www.kostat.go.kr/ansk/), 2024
South Korea’s population is aging more quickly than any other developed country. It took only 19 years for the country
to transition to an aging society and a mere 8 years to approach the threshold of a super-aged society (where 20% or
more of the population is aged 65 or older). In comparison, the United States, Japan, and Germany took 72, 25, and 40
years (see Table 1) to reach similar demographic milestones. This unparalleled rate of aging presents South Korea with
significantly less time to prepare for the challenges posed by an aging population adequately.
Table 1 - The number of years required for “aged society” and “super-aged society”
Source: Demographic transition and the role of financial sector(저출산 고령화와 금융의 역할),) by Sunghoon Yoon, 2011
One of the main drivers of the growth of the older population is the increase in life expectancy. This can be attributed
to several factors, including medical advances, healthier lifestyles, and a decrease in non-communicable diseases.
As of 2021, life expectancy at age 65 in South Korea has surpassed the Organization for Economic Cooperation and
Development (OECD) average, with women living 2.5 years longer and men living 1.5 years longer than the OECD
average.2
As shown in Figure 2, the general population mortality rate has improved by an average of 3.5% annually for both men
and women over the past 50 years. This dramatic improvement is unprecedented and has not been seen in any other
country in the world.
Source: Statistics Korea (https://www.kostat.go.kr/ansk/), 2024
Another factor contributing to the aging population is a declining fertility rate. South Korea's fertility rate, among the lowest in the world, plummeted from 4.5 in 1970 to 0.78 in 2023, well below the replacement rate of 2.1 needed to maintain a stable population. The decline in birth rates is not unique to South Korea; many developed countries also face this issue. However, since the Korean War, the rapid industrialization in South Korea has led to an unparalleled decrease in birth rates. This dramatic decline has left the country facing the dual challenges of an aging population and a shrinking labor force. Fewer young people contributing to the labor force could slow economic growth. In addition, as the elderly make up a larger and larger proportion of the total population, the government will face greater challenges in providing social services.
Source: Organization for Economic Cooperation and Development, 2023
Due to the declining birthrate, the average size of households is gradually shrinking. That average is expected to decrease from 3.1 persons per household in the early 2000s to 2.0 per household by 2045. The number of single-person and couple-only households has increased significantly and is expected to continue to grow.
The factors fueling this decrease include rising higher education levels among women, a variable linked to fertility and family composition. Other factors, such as the increase in the unmarried population and high divorce rates, have also affected the size and structure of families. All of these trends have led to the breakdown of the traditional family structure, resulting in reduced support for the elderly. Consequently, the declining birthrate and changes in family structure have reduced family support for the elderly, significantly increasing the governmental and societal burden of covering the costs of elderly care.
Source: Korean Statistical Information Service (https://kosis.kr/statHtml/statHtml.do?orgId=101&tblId=DT_1BZ0503&conn_path=I3 ), 2024
Traditionally, the insurance market in South Korea has predominantly focused on developing products for healthy individuals aged between 20 and 50. However, due to a declining healthy population and their waning interest in buying insurance, the South Korean insurance industry has entered a slow growth phase since 2010. In response to this challenge, many Korean insurance companies have expanded their target customer base to reach out to the growing number of impaired and senior lives by introducing simplified underwriting products. The number of impaired lives is increasing as the population ages. Historically, however, only a small proportion of these individuals were able to obtain insurance coverage, resulting in a significant coverage gap in this population.
In 2007, before the introduction of simplified issue products, Kumho Life (now known as KDB Life) launched Korea’s first guaranteed issue (GI) product for death benefits. This product aimed to create a balanced risk pool by integrating standard lives seeking a simplified process with substandard lives at reasonable pricing. Unfortunately, the company experienced unexpectedly high loss ratios from this product because face-to-face agents sold it primarily to individuals with pre-existing conditions or very serious health conditions. This adverse experience led insurers to stop developing simplified issue/guaranteed issue (SI/GI) products for several years.
In 2011, Lina Korea introduced a pioneering cancer insurance product called Silver Cancer. This product featured partially simplified underwriting, utilizing the existing standard underwriting application form while relaxing medical disclosures related to hypertension and diabetes. According to the National Health and Nutrition Examination Survey, the most prevalent chronic diseases among Koreans over the age of 60 are hypertension and diabetes. (See Figure 5 for the prevalence rate for hypertension and diabetes by age group). By eliminating underwriting questions related to these conditions, insurers were able to streamline the approval process for a large number of senior applicants. In addition, since hypertension and diabetes have a relatively minor impact on cancer risk, this relaxation of underwriting requirements did not significantly impact pricing, mitigating risks for insurers and reducing premiums for customers.
Source: Ministry of Health and Welfare, 2012 national health data
Silver Cancer achieved significant success in sales and profitability, inspiring other market participants to develop similar simplified underwriting products. Before the introduction of Silver Cancer, most cancer insurance products in Korea were only available to customers under age 60, resulting in a substantial backlog of over 60 customers seeking cancer coverage. However, after witnessing the strong sales of Silver Cancer, the entire market quickly followed suit by launching comparable cancer products within a year. Consequently, Silver Cancer is recognized as the first senior product to successfully penetrate the senior market in Korea.
In 2012, AIA Korea, one of the major Korean multinational life insurers, successfully launched the industry’s first
simplified Issue (SI) medical product. This innovative offering reduced the number of underwriting questions to just
three. It also shortened the required medical history disclosure for hospitalizations and surgeries from five years to two
years. As a result, enrolling in this SI product became significantly easier compared to fully underwritten alternatives.
Notably, it was also the first insurance product to extend coverage to people with mild chronic conditions, including
those in their 40s and 50s. According to research by RGA, approximately 56% of the population aged 40 and above is
eligible to purchase SI products (See Figure 6).
This means that more than half of the Korean population over the age of 40 could potentially benefit from these
streamlined insurance offerings. Among all existing senior insurance products, SI products have the broadest and
most extensive target consumer base, which translates to the largest sales potential.
Source: CDC (Centers for Disease Control and Prevention), 2012 Korea National Health and Nutrition Survey raw data
With just three straightforward questions and a streamlined underwriting process, the product caught the market’s attention because it takes only a few minutes to determine whether applicants can meet underwriting requirements without submitting medical evidence. Previously, one of the biggest frustrations for sales agents and applicants was not knowing if they would meet underwriting requirements after disclosing their medical histories at the point of application. However, despite positive responses from sales agents and customers, few insurers attempted to develop SI products due to concerns about risks, lack of experience with the product, and difficulties in developing risk rates. The major impediment to product growth was insufficient data.
In October 2015, the Financial Supervisory Service (FSS) announced the “Roadmap for Strengthening the Competitiveness of the Insurance Industry” to encourage the development of senior insurance products. The key part of the plan was to abolish or ease regulations on product development in line with the implementation of price liberalization. The deregulation of insurance products and price liberalization policies greatly helped insurance companies enter the senior market. Around the same time, the Korea Insurance Development Institute (KIDI), the Korean regulator that reviews and approves insurers’ risk rates, began calculating SI loadings using industry claim data and sharing that information with small or middle-sized companies that lacked data. This initiative made it possible for almost all companies to develop SI products.
In 2015, Hyundai Fire & Marine, a major non-life insurance company, launched a comprehensive SI product that
covered not only 3CI (cancer, stroke, acute myocardial infarction) diagnosis but also offered medical benefits. This
product was a huge hit in the market.
Moreover, the initial claims experience of the first company to sell this SI product was quite positive, without any sign of
anti-selection. Therefore, many insurers became comfortable with the risk. In 2016 the market exploded as all the major
life and non-life companies began selling SI products, and sales skyrocketed. The number of new insurance policies
for those aged 60 and over has increased sharply since the SI product introductions, while the total number of new
insurance policies has remained stagnant over the past decade. (See Figure 7).
Source: KIDI (Korea Insurance Development Institute) yearbook
Since the SI market began to boom in 2016, these products have become mainstream for impaired and senior lives in Korea. As shown in Figure 8, the annual growth rate of new business for seniors aged 60+ is about 20%, while growth rates for other age groups are declining. The age distribution of new policies reveals that the proportion of seniors has been increasing since 2014, and more than 30% of all new policies issued in 2022 were for those aged 60 and over. Therefore, SI products have greatly helped the insurance market overcome the challenges of stagnant business growth due to the aging population.
Figure 8 – The number of new policies for protection products
Source: KIDI (Korea Insurance Development Institute) yearbook
One of the things that makes Korea’s SI market so unique and successful is the industry-centralized system called the Insurance Credit Information Service (ICIS). This database was established in 2016 to centrally manage credit, insurance, and tech-finance information across the insurance industry. South Korea is the only country in the world with an industrywide database where all policy and claim information is stored and shared by insurers. No other country has such an integrated database, a reality that makes it more challenging for simplified underwriting products to succeed outside of Korea. The entire insurance industry shares claims and in-force data through ICIS, enabling insurers to assess the risk profiles of applicants more accurately. Although the SI questionnaire consists of only three questions, underwriting can still be effective by utilizing this centralized system. It helps insurers detect false disclosures more easily by using previous insurance claims and existing policies with other insurers. In addition to the ICIS database, the meticulously designed product features, such as waiting periods and benefit reduction periods, along with adequately calculated SI loadings, have also contributed to the stable and positive loss ratios of early SI products.
Since the huge success of SI products, both life and non-life insurance companies have strived to differentiate their offerings competitively. The first-generation SI products were quite simple, covering only a few health benefits, such as hospital cash and surgery cash. However, the new generation of SI products is DIY (do-it-yourself); applicants design their own products by selecting from among 50 to 100 optional riders based on their needs and preferences.
Particularly within the non-life insurance sector, which has dominated the accident and health insurance market since 2017, there has been active development and differentiation of SI products. Coverage has expanded beyond simple hospitalization, surgery, and the 3CI (cancer, acute myocardial infarction, and stroke) diagnoses to cover mild illnesses. Given the favorable loss ratios of early SI products and intensified competition in the SI space, some non-life companies became more aggressive by extending the maximum entry age to age 90 and providing a rate guarantee of up to the insured’s lifetime. (See Table 2 for the comparison of new generations and the first-generation SI product).
The initial differentiation strategy for this product started with expanding the entry age, coverage period, and maximum sum assured, followed by coverage differentiation, such as covering various milder diseases and increasing the number of riders attachable to the base policy. Then, in 2018, new SI products such as simplified issue dementia insurance and senior dental insurance were introduced to the market for the first time. As a result, a wide range of senior products have been available in the market, allowing each senior to choose the solution that best meets his or her diverse needs.
Over time, as competition became more intense, some insurers began to modify existing underwriting questions, resulting in many variations of SI questions from different insurers. Notably, in 2019, the first cancer insurance product to ask only one question (called 1Q cancer) was introduced to the market, but many companies didn’t join the trend due to risk concerns. Some non-life insurers have also launched products offering in-kind services such as speech and nutrition therapy and psychotherapy, in addition to cash payouts in the event of a critical illness, such as a stroke.
Source: 보험상품 변천과 개발 방향” (The Evolution and Development Direction of Insurance Products) from the Korea Insurance Research Institute (KIRI) by Sukyoung Kim, Seyoung Kim and Sunjoo Lee, 2018
In the early 2020s, the industry faced limitations in differentiating through diversifying questionnaires and expanding coverage. In addition, consumers have become more price-sensitive as the Korean economy has slowed following the shock of COVID-19. To address these factors, Dongbu Fire & Marine, a major non-life insurance company, launched a new SI product called 3N5 SI, which includes five plans: 315, 325, 335, 345, and 355 SI. This product categorizes an applicant’s impaired health status in detail and offers customized rates corresponding to each risk. It features a system that divides customers with a history of hospitalization or surgery within the last five years into five risk groups, each with a risk level ranging from one to five years depending on how long it has been since treatment.
Each risk group is then charged a different risk premium, with impaired individuals with no recent history of hospitalization or surgery paying a lower premium. For example, 355 SI (no hospitalization/surgery in the past 5 years) is around 30-35% less expensive than the existing 325 SI (no hospitalization/surgery in the past 2 years).
The product has been very well received in the market, leading many other insurers to follow suit, and making this product a new norm in Korea. However, contrary to the original intention, this offering has triggered some churn in the market with existing 325 SI policyholders switching to the new, more affordable SI product.
As mentioned earlier, around the mid-2010s, the Korean insurance industry reached a saturation point and faced a severe growth slowdown. Demographic changes, such as an aging population and a declining birthrate, also severely affected the industry. However, insurers have turned this crisis into an opportunity by significantly lowering the barriers for elderly individuals to purchase insurance through simplified issue products, successfully tapping into the senior market.
Despite this success, intensified market competition has led to a focus on aggressive product design and pricing rather than stressing customer value creation. This has resulted in shorter product life cycles and negative effects on profitability, steering the market in an undesirable and unhealthy direction.
To reverse this situation, the industry needs to adopt a multifaceted approach and move beyond simply selling life insurance products to offer customized solutions that serve the diverse needs of the elderly over the long term. Examples include covering the costs of senior care services such as nursing homes and senior living communities; managing retirement assets; and offering coverage for in-kind health promotion services, such as AI-based health monitoring systems and telemedicine.
As the elderly population grows, the number of people with dementia and mild cognitive impairment is on the rise, intensifying the interest in early detection and prevention. In response, insurance products that focus on early prevention, such as providing in-kind services while covering mild dementia or cognitive impairment, have recently emerged to increase customer satisfaction and provide more comprehensive coverage. Table 3 offers examples of those products.
The recent regulatory changes by financial authorities aim to promote the integration of financial and non-financial sectors and enhance synergy. Regulations have been relaxed, allowing insurance companies to provide healthcare-related platform services. This creates a favorable environment for insurance companies to enter the digital healthcare service and senior care service market. Recently, some insurers have been actively entering the senior care service industry. Companies like KB Insurance have already established subsidiaries to provide premium life care services, including urban senior care facilities and daycare centers. Other major insurers, such as Shinhan Life and NongHyup Life, are also exploring opportunities in this sector. These developments align with government efforts to lower barriers for insurers to enter the senior care service business and provide a wider range of services to policyholders.
The insurance industry should view this regulatory easing as an opportunity to secure new revenue models, enhance long-term competitiveness, strengthen data-driven strategies, and establish preventive healthcare services. Insurers should consider expanding into areas such as digital healthcare services, which focus on disease prevention and management, or long-term care services, which focus on post-care management. By doing so, they can create synergy with their traditional value chain. To succeed in these new ventures, insurers should prioritize creating excellent customer experiences by promoting consumer health through a synergy between healthcare, insurance, and long-term care services. Additionally, they should maximize the effectiveness of insurance products through close integration with healthcare and long-term care services while enhancing sales efficiency and profitability through cross-selling. Insurers should also seek partnerships to improve slow execution, lack of business know-how, and digital capabilities. Emphasis should be placed on developing collaborative services that leverage data from different industries such as healthcare providers, financial institutions, and tech companies, connecting new value-added services through partnerships and cooperation. Ultimately, insurers should aim to create a comprehensive lifestyle health management platform to differentiate customer value and secure long-term growth. This platform should seamlessly integrate preventive healthcare services, insurance, and post-care (long-term care) services into a one-stop solution, extending beyond traditional roles of risk underwriting and coverage.
Another strategy is alternative underwriting for senior products, such as dementia insurance. Traditional underwriting relies heavily on medical records and standardized health questionnaires. However, insurers could use data on lifestyle factors, such as diet, exercise, cognitive engagement, and social activities, to assess dementia risk. The World Health Organization (WHO)3 reports that people can reduce their risk of cognitive decline and dementia by being physically active, not smoking, avoiding harmful use of alcohol, controlling their weight, eating a healthy diet, and maintaining healthy blood pressure and blood sugar levels. Additional risk factors include depression, social isolation, low educational attainment, and cognitive inactivity. Many of these risk factors are lifestyle and behavior-related. Therefore, using lifestyle and behavioral data such as diet, physical activity, cognitive engagement, social interaction, sleep, and stress to assess an individual’s risk of developing dementia can help insurers to improve access, affordability, and accuracy in underwriting decisions.
This data can be gathered from sources like wearable devices, health apps, self-reported surveys, and electronic health records. By utilizing advanced analytics and dynamic monitoring, insurers can personalize coverage and incentivize healthy behaviors that reduce dementia risk.
Advocating for supportive regulatory frameworks is also crucial to facilitate the development and adoption of new insurance products and services. To promote the healthy development of the senior market, Korean financial authorities are actively exploring various strategies. For example, the Korea Insurance Development Institute (KIDI) has recently proposed to revitalize the Korean individual annuity market by introducing impaired annuity products. This initiative aims to strengthen retirement asset security for seniors as the annuity market is shrinking every year. The impaired annuity differentiates annuity payouts based on the health status of the insured, providing higher annuity amounts to those in poor health. Developing customized application forms for the product and pricing appropriate rates based on credible data are critical steps.
Currently, KIDI is leveraging mortality data from the insurance industry and the National Health Insurance Corporation’s long-term care database to develop impaired annuity rates, with the expectation of boosting the senior annuity market. Additionally, the Financial Supervisory Service (FSS) is also taking steps to standardize long-term care (LTC) reimbursement products to prevent excessive market competition and ensure more sustainable market development.
By collaborating with various industries and regulators to approach the senior market from multiple angles, the insurance industry can achieve sustainable long-term growth. Offering not just a variety of products and ancillary services but also a comprehensive one-stop solution allows insurers to cater to the diverse needs of the senior market. Over time, this approach enables them to accumulate experience that can be leveraged to develop new products, creating a virtuous cycle.
[1] Demographic transition and the role of financial sector (저출산 고령화와 금융의 역할),) by Sunghoon Yoon, 2011
[2] OECD, Health Status (https://www.oecd.org/en/data/indicators/life-expectancy-at-65.html), 2023
[3] WHO, https://www.who.int/news-room/fact-sheets/detail/dementia
RGA is proud to sponsor the International Insurance Society (IIS) Leaders of Tomorrow program, which supports the company’s long-term commitment to fostering innovation and cultivating talent across the industry. For the last 10 years, the Leaders of Tomorrow initiative has empowered 75 rising stars worldwide as part of a unique mentorship program that culminates in the publication of original papers submitted by participants. In each class, a subset of candidates are selected for the RGA Leaders of Tomorrow Awards and recognized at the Global Insurance Forum.
