This section examines the growth rates of premiums and payouts in the life sector. It first shows the growth rates of gross premiums written for life insurance by jurisdiction and then discusses life insurance payouts in 2023.
Global Insurance Market Trends 2024
Abstract
In the life sector, gross premiums increased in nominal terms in just over two thirds of the reporting jurisdictions (34 out of 50), with the largest rise occurring in Spain (37%) after Türkiye (83%) (Figure 3.1). By contrast, life business contracted in nominal terms in a number of European countries (e.g. Croatia, Portugal, Luxembourg) and in some Asian jurisdictions (e.g. Korea, Singapore). In real terms (i.e. after adjusting for the changes in consumer prices), business volume was stable on average, with a real growth rate below 1% (versus -3.9% real growth in 2022), although this hides differences in trends across jurisdictions.
In per cent
Note: Data refer to the gross premiums written in the life sector for all undertakings (i.e. domestic undertakings and branches and agencies of foreign undertakings operating in the reporting jurisdiction) except when only data on domestic undertakings are available. The nominal premium growth rate is not shown for Türkiye (83.4%) for readability purposes.
Source: OECD Global Insurance Statistics.
Trends in gross premiums written varied by type of life insurance product. Annuity products and other guaranteed life investment products generally experienced premium growth. For instance, in the United Kingdom and the United States, the sales of annuity products soared in 2023.1 In Japan, the fastest growing segment in the life sector was annuities, while in Spain the annuity business grew by 53.7% (Dirección General de Seguros y Fondos de Pensiones, 2024[18]). By contrast, unit-linked products and other products, where policyholders bear the investment risk, experienced more mixed results, with some jurisdictions registering an increased allocation of premiums to these products in 2023 compared to 2022 (e.g. Bulgaria, Estonia, Greece, Lithuania, Romania), while others saw a drop (Hong Kong (China), Poland, Portugal).
The increased interest in annuity products resulted from the higher level of interest rates relative to earlier years. Higher interest rates have made annuity products and other guaranteed life investment products more attractive, both to individuals and corporates. In a context of higher interest rates, individuals could expect higher guarantees from insurers and higher income from these guaranteed products. Some employers have also sought to take advantage of the improving funding position of their pension plans to transfer the liabilities and risks to the insurance sector (OECD, 2024[19]). Insurers have recorded an increase in bulk purchases of annuities from pension schemes (such as in the United Kingdom).
In some jurisdictions, heightened consumer interest in guaranteed products may have occurred at the expense of unit-linked products and other products where policyholders bear some investment risk. For example, in Australia, Hong Kong (China), Poland and Portugal, premiums for non-unit linked products increased while premiums for unit-linked products declined. The elevated volatility in financial markets (e.g. in 2022) may have contributed to the shift away from riskier products, such as in Latvia for unit-linked products and in Chinese Taipei for variable annuities. On the other hand, gross premiums written for unit-linked products increased in some jurisdictions (e.g. Bulgaria).
The decline in premiums for life protection products that some jurisdictions experienced was caused by the downturn in housing markets in 2023. Higher interest rates have translated into higher mortgage lending rates, making it more costly for people to purchase a home, and thus reducing home property transactions and lending. This can have an effect on the demand for life insurance, which banks may request as a condition to provide a mortgage loan. In the United Kingdom, the decline in property sales led to a decline in life protection sales. The decline in premiums for life protection products in Spain could also have been due to a drop in mortgage lending (Dirección General de Seguros y Fondos de Pensiones, 2024[18]).
Several other obstacles weighed on the demand or supply of life insurance products and therefore on the growth of life premiums in general. Australia noted that one of these obstacles was the increase in price of life insurance policies, set against cost-of-living pressures. Another obstacle may be the low perceived value of life insurance products or a lack of consumer confidence, which Slovenia noted as being the case for unit-linked products. On the supply side, Lithuania attributed the decline in the sale of new life insurance contracts to restrictions on commission fees for unit-linked contracts. In Slovenia, insurers have limited the supply of endowment policies. In Switzerland, insurers rarely offer guaranteed products, and when they do, the guarantee is often just a capital guarantee, thus potentially further limiting take-up.
The trends in terms of payouts varied widely across jurisdictions and even within regions.2 Insurers experienced a large increase in payouts in nominal terms in 2023 in some European (e.g. Estonia, Italy, Luxembourg) and Latin American countries (e.g. Colombia, Nicaragua), and a large decline in some others (e.g. Croatia, Hungary and Poland in the EU, and Bolivia and Paraguay in Latin America).
The rise in interest rates compared to earlier years contributed to an increase in surrenders and thus payouts in life insurance in several countries. Surrenders increased in France, as a result of the rise in interest rates and the rising cost of financing mortgages (ACPR, 2024[20]). According to France’s insurance supervisor, policyholders surrendered their policies in order to draw on their savings and purchase a property or help a relative purchase a property. Lithuania also noted an increase in the termination of contracts, which it attributed to elevated inflation and increased consumer demand to draw on savings to finance higher expenses. Luxembourg also recorded a large increase in surrenders, due to the repayment of variable rate loans and a move towards products offering higher yields. In Chinese Taipei, higher interest rates led to an increase in surrenders as policyholders cancelled their life insurance policies in order to purchase other, higher yielding, financial products. Yet some countries reported that surrender rates remained stable (e.g. Netherlands, Slovak Republic); for instance, in the Netherlands, tax penalties for withdrawals from life insurance contracts may have dissuaded people from surrendering their policies despite higher interest rates.
Other factors were behind the increase in payouts. For instance, the evolving conflicts in the Middle East led to a surge in payouts from insurance companies in the region. In Singapore, payments for contracts maturing or anticipated endowments rose in 2023 and accounted for the large share of payments by life insurers.3 In Estonia, payouts increased due to the end of a 12-year period of tax exemption for unit-linked products, which led to an increase in policyholders opting out of their unit-linked contracts. Increased inflation led to higher payouts for annuity products when benefit payments were partly indexed to inflation. For example, in Colombia, annuity payments are indexed to the consumer price index every year. Additionally, annuity payments (i.e. pensions) in Colombia cannot be lower than the minimum wage and the minimum wage grows more than inflation, which means that the minimum pension that retirees receive increases more than inflation.
Some jurisdictions witnessed lower payouts relative to 2022. For instance, lower mortality in Poland led to fewer payouts and improved technical profits for traditional life insurance. In Croatia, the payouts for unit-linked products declined in line with the shrinking unit-linked business.
← 1. 'Milestone' year as annuity sales hit record high - Pensions Age Magazine (for the United Kingdom) and sigma 2/2024: Life insurance in the higher interest rate era | Swiss Re (for the United States).
← 2. The trends in payouts depend on the conditions triggering payouts and the type of payments, which can vary across products. Payouts can happen upon the death of policyholders and the maturity or the surrender of the policy. For example, the death of a policyholder of a whole life insurance triggers payments to beneficiaries. Policyholders can receive payments from their endowment policies after a specific term (maturity of the contract). Policyholders can surrender any life insurance policy but may face penalties. Payouts may take different forms such as a single payout (i.e. lump sum) or regular payments. The value may be fixed or indexed (e.g. inflation).