Automated teller machines (ATMs) at major banks installed in downtown Seoul [사진=연합뉴스]
As market interest rates turn downward, bancassurance, which provides comprehensive financial services through cooperation between banks and insurance companies, is attracting attention. After the Hong Kong H-index stock-linked securities (ELS) incident, the banking sector expanded principal-guaranteed products to increase non-interest profits.
According to the Life Insurance Association on the 27th, the total bancassurance insurance premium income of domestic life insurance companies as of July this year was 9.9793 trillion won. This is a 38% increase from the same period last year (KRW 7.2298 trillion). The increase in bancassurance sales was due to a combination of factors internal and external to the bank.
First, internally at the bank, the increase in sales of principal-guaranteed products after the ELS incident early this year had an impact. Previously, sales were concentrated on ELS with high returns, but as major banks stopped selling ELS, bancassurance, one of the substitute products, benefited.
In January of this year, initial bancassurance insurance premium income amounted to only KRW 1.7837 trillion, 34.7% less than the same month last year. However, initial insurance premium income increased to 1.5542 trillion won in February, right after major banks stopped selling ELS at the end of January, an increase of 43.6% compared to February of last year. In March and April, initial insurance premium income increased by 262.9% and 152.5%, respectively, compared to the same months of the previous year.
Externally, the decline in market interest rates as major countries’ monetary policies shifted to an easing stance had an impact. As market interest rates are expected to decline further in the future, returns can be increased through ‘fixed interest rate lump sum payment products’, which are banks’ fixed interest rates.
An insurance industry official said, “It seems that the banking sector wants to increase bancassurance sales to increase non-interest profits.”
Stock-linked derivative bonds (ELB), which have a similar structure to ELS but guarantee the principal, have also emerged as a major investment product along with bancassurance. According to the Securities Information Portal, the amount of ELB sold until last month this year was KRW 15.6419 trillion, an 80.2% increase compared to the same period last year (KRW 8.6816 trillion).
Index-linked deposit (ELD) sales are also rapidly increasing. Sales of ELDs are also increasing because the principal is guaranteed and the rate of return is higher than that of general deposit products.
An official from the banking industry said, “Sales of bancassurance and ELB/ELD are increasing because the principal is guaranteed and it helps banks’ non-interest profits,” adding, “In particular, as interest rates turn downward, financial consumers who want a higher rate of return or who want to lock in the current interest rate are purchasing related products. “A lot of people look for it,” he explained.
Reporter information Jang Moon-ki [email protected]
