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The Determinants of Insurance Risk Profit Ratio in Korean Life Insurance Companies
Journal of Insurance and Finance
2009, 20(1),
pp.3-38
Publisher : Korea Insurance Research Institute
Research Area : Business Management
Publisher : Korea Insurance Research Institute
Research Area : Business Management
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This research analyzes the determinants of insurance risk profit ratio in Korean life insurance companies. Using panel data, we evaluate several factors both firmspecific variables and other socio-economic variables. We show that product portfolio(morbidity benefit vs. mortality benefit), marketing channel(direct vs.financial planner), and ownership type (domestic middle-small size company vs.foreign company) are significant variables. However, size(number of business in force) is not significant factor. Decreasing profit ratio since 2003 is related to the social and economic changes such as increasing of screen ratio in program for early detection of cancer and improvement of morbidity. These results imply that there are obvious limits on the performance management of insurance risk profit.Therefore, life insurance companies should target feasible profit level and use nonguaranteed elements. Also optimal portfolio and marketing channel strategies are necessary. Finally, life insurance companies should project future cash flow to cope with the potential deterioration of solvency.
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