As competition intensifies among insurers seeking to dominate the market for products covering dementia and long-term care due to an aging population, new contracts are surging. However, with cancellations steadily rising, insurers face growing concerns over maintaining their insurance portfolios.
According to data from the Insurance Development Institute released on the 17th, the number of dementia and long-term care insurance policies increased from 379,000 in 2023 to 496,000 last year. While new contracts have risen sharply each year, held policies actually declined from 3.629 million to 3.528 million during the same period. Even as new contracts grow rapidly, cancellations exceed them, resulting in a net decrease in total held policies.
This suggests that while the dementia and long-term care insurance market is expanding rapidly on the surface, insurers face significant challenges in retaining policies over the long term. Analysts note that insurance products targeting the elderly often involve relatively high premium burdens, making it difficult for policyholders to maintain coverage after enrollment.
Insurers are also increasingly concerned. Although the aging population drives growing latent demand for dementia and long-term care insurance, the structure is becoming one where insurers inevitably incur losses if they aim to cover not only dementia diagnosis but also subsequent caregiving and support costs. In particular, rising post-diagnosis caregiving expenses are placing increasing pressure on insurers.
In response, insurers are scaling back coverage. Indeed, the maximum payout amount (sum assured) covered by insurance dropped from 3.2179 trillion won in 2023 to 2.8358 trillion won last year. It is estimated that while insurers initially aggressively sold high-coverage products, some have since adopted more conservative product structures, or policyholders themselves reduced coverage due to increased premium burdens. Some insurers, believing they cannot generate profits from dementia and long-term care insurance, are instead focusing more on morbidity insurance (simplified underwriting insurance).
Moreover, recent fierce competition among products covering expensive new dementia drugs costing tens of millions of won has prompted financial regulators to slow down the rollout of dementia insurance.
The Financial Supervisory Service requested insurers to disclose internal data regarding loss ratio calculations last February after multiple products offering up to 40 million won in coverage for dementia treatment costs were launched. This move followed insurers actively recruiting policyholders by promoting coverage for new drugs like "Leqembi," which slow the progression of Alzheimer's disease.
Nevertheless, from insurers' perspective, the dementia and long-term care insurance market remains a critical opportunity. It is a long-term protection product that enables them to secure CSM (Contractual Service Margin), whose importance has grown following the adoption of new accounting standards (IFRS 17).
Given CSM's characteristic of recognizing expected future profits over the insurance period, dementia and long-term care insurance—covering risks over extended durations—is considered a key product category for expanding new contract CSM.
An industry official stated, "Due to aging, the absolute number of elderly continues to rise, and the financial burden associated with dementia onset is substantial, ensuring steady enrollment." He added, "Compared to initial products, some coverage reductions have been implemented recently, and policy retention remains challenging, causing significant concern among insurers."
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