This study summarizes the history of the market opening, as well as the international norms for insurance trades. Our objective is to predict the consequences of the opening of the Korean insurance market, and establish appropriate response measures.
The fundamental reason for the opening of the Korean insurance market is a change of international trade order. In other words, other countries are preserving a deficit in product trades with a surplus in service trades, and have continued service education liberalization, for which they have comparative advantages. These countries are assisting multilateral negotiations on insurance trade liberalization and maximizing their own trade benefits by placing trade conditions. It is considered a more direct reason for the opening of the Korean insurance market.
Although the growth of the insurance industry tends to outpace that of economy, insurance trades through direct investment tend to decrease. However, the stagnation of the U.S. insurance market and the relatively high growth of the third world’s insurance markets have become another reason why U.S. insurance companies are turning to overseas insurance markets. U.S. policy for overseas insurance market liberalization is that the efficiency in relevant insurance industries may be enhanced by acquiring technology and facilitating trade.
The service industries of finance, transport, telecommunications, trade, and medicine (including insurance) are key industries that have a substantial impact on a country’s economy, society, and culture. If such industries remain immature, they should be protected from open markets. However, it is difficult to determine whether a particular insurance industry is immature. In order to evaluate the status of the Korean insurance industry, this study has analyzed the structural factors and profitability in terms of the number of companies and their market shares, economic feasibility of the scale of restrictions on market entry and exit, appropriateness of prices, capital power, insurance solicitation system, and the performance factors of product compositions. The results of the analysis have determined that there are many improvements to be made with regards to the the performance of the Korean insurance industry. These improvements mainly address industrial structural features and non-price competition, which encourages inefficiency.
The opening of the Korean insurance market is finding acceptance due to the relatively small amount trade of the Korean government. It can be expected to promote national welfare by enhancing efficiency in the Korean insurance market under the following assumptions:
First, from a long-term perspective, the non-price competition system should be replaced by a price-competition system. To this end, improvements on the accounting and statistical system should be made towards supervising effective competition.
Secondly, as short-term policy tasks for the transition period, new corporate entry to the life insurance industry should be made easier, capital power increased, a responsible management system established, and an insurance guarantee system to protect the insured should be introduced.
Thirdly, with respect to allowing foreign insurance companies to expand either alone or by joint venture, and the expansion of domestic insurance companies with local head offices, consideration should be made of the benefits of the market opening on the Korean population.
새로운 국제무역질서의 전개방향과 우리의 대응과제((The directions of progress of new international trade order and counteracting tasks: for insurance service sector)
|Series Title; No||정책연구시리즈 / 88-17|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade|
|Holding||KDI; KDI School|