As the percentage of aging and aged people grows globally, the opportunity arises to build a “silver economy,” with services designed for the middle-aged and elderly. The insurance industry, with offerings such as dementia insurance, can play a vital role in this silver economy. South Korea provides an example of one road in.
There are few things nearly every country in the world has in common. An aging population is one of them.
The World Health Organization (WHO) expects the global population age 60 and older to double by 2050 to 2.1 billion.1 Virtually every country in the world is experiencing growth in the size and proportion of older people in their population, the WHO said.
Along with this accelerated aging has come a rise in cases of dementia. Alzheimer’s Disease International (ADI) data suggests someone in the world develops dementia every three seconds. More than 55 million people worldwide were living with dementia in 2020. This number is expected to reach 139 million by 2050.2
South Korea offers an instructive case study for a product that could be successful in other markets to help care for those in the expected dementia boom — dementia insurance.
South Korea’s birth rate fell 8% from 2022 to 2023 and is the lowest in the world, at just 0.72.3 For a population to hold steady, that number needs to be 2.1. This “baby bust” has, in recent years, boosted the percentage of the South Korean population considered to be aging.
In 2023, the proportion of the South Korean population older than 60 reached 26.7%. The percentage of the population older than 65 hit 18.5%.4
Aging societies face heavy economic burdens, but they also have an opportunity to create a “silver economy” that focuses on the middle-aged and elderly market. The insurance industry is a key part of that silver economy.
Dementia insurance is growing in popularity in South Korea's middle-aged and elderly insurance market in recent years. As of the end of 2022, approximately 8 million people in South Korea had dementia and care insurance – 15.5% of the total population. Among them, the age groups of 50 to 59 and 60 to 69 years old had the highest insurance coverage rates, at 24% and 27%, respectivel.5
The development of dementia insurance in South Korea can be traced back to 20026, though widespread adoption came slowly. Before 2018, most products on the market included coverage only for those with severe dementia – that is, a clinical dementia rating (CDR) of Level 3.
According to a report by the Korea Consumer Agency, among the 103 products on sale in 2016 that included dementia coverage, only five included mild dementia.7 That restriction kept dementia insurance from receiving much attention in the Korean market and tamped down consumer awareness.
But in September 2017, the South Korean government announced the National Dementia Responsibility System, a policy to address dementia at the national level. Through this initiative, the Ministry of Health and Welfare established a comprehensive dementia support system, which included dementia assistance centers, expanded long-term care services, and stronger medical support.
Amid heightened public awareness, insurers raced to launch new dementia products. New products not only covered severe dementia, but also extended coverage to moderate dementia (CDR Level 2) and mild dementia (CDR Level 1).
Another popular benefit was a severe dementia long-term care annuity. When severe dementia is diagnosed, the annuity then is paid for life or for a certain period, such as five years.
Dementia insurance underwriting can be done through simplified issue or full underwriting. The simplified issue process involves a shorter questionnaire, primarily focused on dementia risk.
Some products include a surrender value, which adds a savings component to the product. Others have no surrender value, which lowers premiums. The latter design tends to have better sales.
In the wake of the change in policy at the national level, sales of dementia insurance in South Korea grew significantly, doubling in 2018 compared to 2017. New business premiums nearly tripled.
Seeing that market trend, more insurers, including many leading companies, introduced dementia insurance products in early 2019, driving sales to new heights.
With increased competition came a change in the types of products on the market. Dementia insurance that provided only diagnostic coverage no longer met market demand. By the start of 2021, insurers had upgraded dementia insurance to add diversified riders and services, strengthening the competitiveness and attractiveness of the product.
Riders included the following four categories:
In addition to diversifying riders, insurers also introduced a variety of value-added services to attract customers. Customers who have purchased dementia insurance products can submit requests to receive corresponding services. Some may require additional fees. These value-added services are categorized based on the severity of their dementia status:
These value-added services allow insurers to increase communication with customers and turn dementia insurance into a full-process management product for dementia, making it even more attractive.
South Korea entered an aging society earlier than most other nations, and its insurance market responded accordingly to demographic changes. Given that, the successful case of dementia insurance in the South Korean market is worth studying.
Such an examination reveals three main lessons for other markets:
RGA Korea has helped many insurance companies, including some major players, to develop dementia insurance products. The RGA China office is also actively developing dementia insurance products, and Korea’s experience is worth learning from.
At RGA, our product development experts are eager to engage with clients to better understand and tackle the industry’s most pressing challenges together. Contact us to discuss and to learn more about RGA's capabilities, resources, and solutions.
