South Korea to Let Policyholders Access Death Benefits as Retirement Income
South Korea faces a significant elderly poverty problem, with nearly 38% of its population over 65 living below the poverty line, the highest in the OECD. In response, the government is introducing reforms that allow life insurance policyholders to access death benefits while still alive, effectively turning these payouts into a source of retirement income. This initiative, planned for implementation starting in October for policyholders aged 55 and older, aims to bridge the income gap before the national pension payments begin at age 65, considering the average retirement age in Korea is 53.
The reform targets fixed-rate life insurance policies with death benefits up to 900 million won and premium payments completed over at least 10 years. Policyholders can withdraw amounts exceeding the total premiums paid, up to 90% of their death benefit, either as a lump sum or in monthly installments. This change is anticipated to impact approximately 759,000 policies with total benefits of around 35.4 trillion won (USD 25.3 billion) becoming accessible during policyholders' lifetimes.
This shift marks a transformative redefinition of life insurance’s role from a death benefit safety net for heirs to a viable income stream for seniors, accommodating societal changes including increasing single-person households and diversified family structures. The government’s reform aligns with national strategies to stabilize incomes for an aging population amid rapid demographic shifts, as South Korea recently became a super-aged society with over 20% of its population aged 65 and older.
Life insurers are preparing for this change by expanding into senior care services such as nursing homes, caregiving, and healthcare support, which are expected to be introduced as service-type products following regulatory review next year. Insurers with established senior care networks, like KB Life, Shinhan Life, and Samsung Life, are positioned to benefit, as these services could offset declining traditional life insurance sales.
The reform is expected to create new business opportunities for insurers by diversifying their product offerings and revenue streams, particularly in the growing senior care market. This strategic pivot highlights how insurers can leverage demographic trends and regulatory changes to innovate within a maturing life insurance market. Overall, the policy enhances financial security options for South Korea’s elderly population, addressing pressing socioeconomic challenges linked to aging and income inadequacy.