The insurance industry has observed a declining trend in the retention rate of ‘undamaged products’ – insurance policies that offer cheaper premiums but don’t provide refunds if canceled. According to data from the Korea Life Insurance Association, the average first-year retention rate for these products among domestic life insurers was 86.24% as of last December. However, this rate dropped to 71.08% in the second year and further decreased to 64.04% by the third year. By the fifth year, the retention rate fell below 60% for many companies.
Retention Rates by Insurance Companies
KB Life Insurance had the lowest 5-year retention rate at 43.17%, followed by Samsung Life Insurance at 49.90%, and Kyobo Life Insurance at 55.29%. Other major insurers like MetLife (55.30%), Dongyang Life (57.04%), and Hanwha Life (58.70%) also reported relatively low retention rates. Companies with higher retention rates included Heungkuk Life Insurance (61.80%), KDB Life Insurance (64.23%), and Mirae Asset Life Insurance (65%).
Reasons for Declining Retention Rates
Industry experts attribute the decline in retention rates primarily to customers switching to better insurance deals rather than struggling with premium payments. Since undamaged products don’t offer refunds upon cancellation, policyholders find it easier to change their insurance plans. “Of course, some customers may find it difficult to pay insurance premiums due to the difficult economy, but there are more cancellations to change insurance,” said an industry official. “On the contrary, there are many cases where the guarantee is reduced than the principal due to the exemption period for each collateral, so we should be careful.”
Industry Response
The Financial Supervisory Service has announced plans to expand the installment payment period through the reorganization of insurance sales fees and manage subscribers’ insurance contracts in the mid- to long-term. This move aims to address the issue of declining retention rates and improve customer satisfaction with insurance products.
