Rising Cash-Outs from Life Insurance Policies in South Korea Due to Stock Market Gains

Insurance policy cash-outs and savings deposit withdrawals are on the rise in South Korea as investors seek to capitalize on robust stock market gains. In the first quarter, the country's top life insurers—Samsung Life Insurance, Hanwha Life Insurance, and Kyobo Life Insurance—reported policy surrender payouts reaching 4.9 trillion won ($3.3 billion). This marks a significant 16.3 percent increase from the previous year, according to industry data.

This growing trend shows an increasing number of policyholders terminating contracts early for potentially higher returns from stock market investments. Surrender values usually compensate less than the total premiums paid upon early termination. Savings-type insurance policies are particularly affected, seeing payout surges of 23.2 percent year-on-year to 2.29 trillion won. These policies typically return premiums with interest at maturity and can be disbursed in a lump sum or as annuities.

An industry insider emphasized that "money is clearly moving as consumers surrender policies despite losses to seek higher returns in securities." Although this shift mirrors historical patterns during stock rallies, experts consider the current trend to be temporary, posing no significant threat to insurers' profitability.

This shift in consumer behavior has impacted financial firms' earnings. Shinhan Life Insurance and KB Life Insurance reported profit declines of nearly 40 percent and 8 percent, respectively, for the first quarter. In stark contrast, profits at Shinhan Securities and KB Securities more than doubled, increasing by 93 percent, respectively.

Furthermore, savings-bank deposits continue to decline despite institutions raising interest rates to stabilize funding. The Bank of Korea reports savings-bank deposits fell to 97.93 trillion won, a record low in over four years. This reduction persisted even as one-year time deposit rates peaked at 3.24 percent, the highest since January of the prior year.

Major commercial banks have also experienced outflows, with combined time deposit balances at institutions like KB Kookmin and Shinhan dropping by about 12 trillion won from late February to early May. These financial movements align with rising stock market indexes. The Kospi, South Korea's benchmark stock index, has rebounded from March lows and recently surpassed 7,800 intraday—an 85 percent rise this year and a 190 percent increase from the end of 2024.