South Korea’s Samsung Fire & Marine Insurance announced it will end its bancassurance operations, marking the end of a 21-year practice.
Company officials said the general insurer had stopped selling new insurance products through banks as of April 1, citing a decline in sales and competitive interest rates offered by banks, on short-term savings products, as the main reasons.
The introduction of the International Financial Reporting Standard (IFRS) 17 in January 2023 is also likely to have influenced the decision. The new accounting standard, which alters how balance sheets are reported, favours the sale of protection-based insurance rather than savings-based products.
Despite the cessation of new sales, Samsung Fire & Marine Insurance said it would commit to maintaining its existing agreements with banks and would oversee previously sold products.
The company added it is currently exploring opportunities in international markets, such as Vietnam.
Banca decline
The bancassurance channel, once lucrative for distributing savings and pension insurance products in South Korea, has seen a decrease in popularity among non-life insurers in the country.
Industry data compiled by the Financial Supervisory Service shows a 15% drop in income from bancassurance for non-life insurers, from 6.2 trillion won (US$4.5 billion) in 2018, The Korea Herald reported.
The shift towards protection-based insurance, encouraged by IFRS 17, has also led to a 38% decrease in sales of savings products for life insurers last year.
Insurers, including Meritz Fire & Marine Insurance and Heungkuk Fire & Marine Insurance, have already exited the bancassurance business. While others, such as Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance, continue to operate within this space. However they are likely to be reassessing their bancassurance commitments.
The move by insurers to withdraw from bancassurance reflects a changing landscape in the South Korean insurance industry, driven by shifting consumer preferences and regulatory changes.
