This paper examines household participation in the financial market in response to changes in household debts, disposable income, and real estate. Only less 11 percent of households have participated in the stock market, and less than 0.4 percent have participated in the bond market. However, the participation rate is twice as high in fund markets than in stock markets. Financial debt chiefly results in impingement on financial market participation and is strongly pronounced, especially in fund markets. In contrast, real estate and disposable income tends to boost market participation, offsetting the effect of household debts. In fact, real estate increases household’s likelihood of participating in financial markets by 5 percent or more while an increase in disposable income increases by a range of at least 8 percent in liquid markets to 15.3 percent in fund markets, respectively.
Most literature on the Korean life insurance industry have focused on economic and management concepts such as competitiveness, performance, and efficiency. This study; however, qualitatively investigates the characteristics of the Korean life insurance industry based on the social solidarity concept. In the beginning, the Korean life insurance industry had grown oligopolistically but it has developed very competitively after the market opening in late 1980s. This paper examines the solidarity characteristics of the life insurance industry in Korea by a content analysis with a hypothesis that it must be changed over the decades. The research result shows that the life insurance industry in 1970s could be viewed as ‘bureaucratic solidarity’ strongly, which is evidenced based on Kang(2006)’s solidarity classification standard. It demonstrated the characteristics of ‘strategic solidarity’ right after the life insurance market opening in 1986. However, it also pursued ‘moral solidarity while respecting consumers’ autonomy since 1990s when the influence of consumers became stronger.
Currently, Korean auto insurers have to cope with the world-fastest population ageing under the environments that force them to use premiums that are below break-even points. Unlike other property-casualty insurance lines, Korean auto insurers cannot apply break-even insurance premiums, calculated with the consideration of trend, due to financial authorities' interference and severe market competition. Therefore, it is practically impossible for auto insurers to apply break-even premiums with the consideration of trends in loss ratios of age-groups. This research was conducted to show that auto insurers can improve their profit by using optimal age-group rates, which are calculated with the consideration of population change. To pursue this purpose, we demonstrate that age-groups of auto insurance have distinct loss-ratio trends. Then we explain how insurers can maximize(minimize) their profits(losses) by taking these trends into consideration in calculating age-groups' auto insurance rates.
While business diversification can have a positive effect on the performance of a firm through economies of scopes and distributing uncertainty or risk over the different business lines, it can also have a negative impact on the efficiency and on the profitability of a firm through possible costs from business expansion, or inefficient subsidies to unproductive sectors inside the firm. Therefore, it would be an empirical question whether business diversification is beneficial or harmful to a firm.
This paper analyzes how insurers' product diversification strategies affect their profitability and its volatility, using data on Korean life insurance companies from FY2003 to FY2012. Our estimation results suggest that product diversification of an insurer has a negative effect on its profitability, evaluated through ROA. However, after considering the volatility of its profitability, product diversification and profitability measured by RAROA have a nonlinear relationship, where either low or high level of diversification results in higher profitability than moderate level.