Foundations for the future
Life & Health Reinsurance helps South Koreans face the consequences of living longer
“I was deeply impressed by Swiss Re’s professionalism and commitment. I hope that we can continue to grow together.”
CEO, LINA Korea
Who would not wish to live to be a hundred? We naturally desire a long life for ourselves and our loved ones – but every fulfilled desire brings its own unforeseen consequences.
Walk through the restaurant district of Seoul, with its youthful bali bali or “hurry up” culture, and it would be hard to believe that South Korea has the most rapidly ageing society on the planet. From 2000 to 2019, the proportion of South Koreans over 65 will have doubled, from 7% to 14%. That proportion will more than double again, to 33%, by 2050. In just 50 years, South Korea’s youthful tiger economy will turn grey, challenged by a range of social issues currently faced only by the “old” countries of Europe and Japan.
South Koreans today work more hours than anyone else in the industrialised world. Nevertheless, their savings rate is among the lowest – while their life expectancy is among the highest. Medical care is world class, but many procedures and conditions are not fully covered by national health insurance.
Private insurers work to bridge the gaps, but eligibility issues can leave whole sections of the population without cover. Small wonder, then, that many South Koreans worry about funding their inevitable medical costs.
For example, it used to be impossible for people over 60 to take out insurance to pay for future cancer care; such policies simply did not exist. That is, until now.
ShinOk You is Head of Product of LINA Korea, a subsidiary of the CIGNA Corporation and South Korea’s largest and best-known life and health insurer among direct marketers. She explains the dilemma they face in catering to a rapidly ageing market:
“LINA almost always retains its insurance risk, so we take a cautious view. We need to understand every aspect of the risk we’re taking on. In the case of cancer products for people over 60, we knew there was strong demand, but since this is essentially a new customer segment – and one with a wide variation in basic health – we were unsure about the risk profile.” >
YongSuk Kwon in Hong Kong
>Swiss Re Korea had also spotted this dilemma and in July 2011 assembled a team of experts from across Asia – actuaries, underwriters, medical doctors and client managers – to explore solutions. “We saw the demand,” explains YongSuk Kwon, Swiss Re’s Head of Client Market Life & Health Korea, “but to meet it we had to draw on our global reserves of knowledge and experience.”
Within a month of that first meeting, the Swiss Re team had an answer. Using demographic information from Japan (an otherwise similar population but with even greater life expectancy than South Korea’s), Swiss Re Korea designed a cancer care product that could be taken out after age 60 and renewed up to age 100. While the National Health Care system covers some medical costs, the new product would provide wider coverage. The application and underwriting process would be simplified – an important requirement for this segment. The product would also manage the increased risk from many pre-existing chronic conditions without excluding the people who suffered from them. “Our simplified underwriting opened the door to new markets without sacrificing sound risk management standards,” says YongSuk. “With this new approach, we developed a first-time product.”
“We don’t want to wait for opportunities to come to us: we want to create those opportunities and find partners who share our vision to bring them to the market.”
Head of Client Market Life & Health, Swiss Re Korea
The challenge now was to find the right insurer to introduce it to the market. “Immediately, LINA was the obvious choice,” continues YongSuk; “it has the scale and reach. It has great presence in direct marketing through telephone and television infomercials, which is ideal for an elderly market.”
“However, while LINA’s disciplined approach was a tremendous endorsement,” he goes on, “it was also an obstacle: since they rarely bought reinsurance, we hadn’t had a business relationship with them for more than 10 years.”
Nevertheless the logic of the partnership was so compelling that Swiss Re Korea reached out to LINA to earn their trust. Actuarial and underwriting teams made sure that the product’s risk profile was fully aligned with LINA’s own risk management structure. Swiss Re then closely partnered with LINA through the negotiations to secure approval from Korea’s insurance regulators. “I was deeply impressed by Swiss Re’s professionalism and commitment,“ says Benjamin Hong, CEO of LINA Korea, “I hope that we can continue to grow together.”
Food vendor at Gwangjang market, Seoul, South Korea
Indeed, the LINA/Swiss Re agreement is envisioned for the long term, so that both partners can meet the critical needs of a changing South Korean society. “This is what our strategy calls for: extending our risk appetite and broadening our business,” concludes YongSuk; “We don’t want to wait for opportunities to come to us; we want to create those opportunities and find partners who share our vision to bring them to the market.”
Further reading: More on how the LINA/Swiss Re agreement reflects our larger approach to longevity