Life insurance firms push for payroll cut

Fears of massive layoffs are looming high over the nation’s life insurance industry in the wake of worsening profitability due mainly to the protracted era of low interest rates and lackluster performance in attracting new policyholders.

While the nation’s top three insurance firms are initiating the full-fledged manpower restructuring, small and mid-sized players are expected to follow suit, industry watchers said Tuesday. The big three insurers are Samsung Life, Hanwha Life and Kyobo Life.

Kyobo Life Insurance is drawing wide interest, in particular, as it has recently unveiled its plan to cut its payroll by 15 percent from 4,700 staffers to 4,000 through a voluntary redundancy program.

The company’s large-scale manpower restructuring involving branches nationwide marks the first time in 12 years since 2002. Its spokespeople said the insurer plans to accept applications for the early retirement by July.

“The plan is part of our efforts to brace for unfavorable business environment amid the low interest and low growth trend,” a spokesman said. “It is also aimed at more efficiently operating the staff via renovated personnel policies in the future.”

Some insiders alleged that Kyobo Life is seeking to slim down its structure before its planned bids for the public funds-injected Woori Bank, the flagship of Woori Financial Group.

Samsung Life has already begun payroll reduction. Its voluntary redundancy program features support for retirees who take jobs at the company’s subsidiaries or sister firms.

About 15 percent or 1,000 employees will likely be transferred to its subsidiary Samsung Life Service or other affiliates such as Samsung Fire & Marine and Samsung Electronics, according to the company.

Hanwha Life has accepted proposals for early retirement from some 300 employees who have worked there for more than 20 years.

According to the Financial Supervisory Service, the insurance sector saw its collective net profit fall 9.3 percent in 2013 on-year. Despite the increase of assets by 52 trillion won ($49 billion), their collection of insurance premiums dropped 8.2 percent, or 6.9 trillion won.

Their number of new policyholders is estimated to have plunged 51.8 percent over the same period.

Further, life insurance firms’ overseas branches have posted huge net losses over the past few years due to the heavy costs of operating in foreign markets, the FSS said.

Some companies have reported poor performances in their stock investments through equity-linked insurance products.

Equity-linked insurance products, also known as variable insurance, invest part of customers’ premiums in the stock market.

By Kim Yon-se (kys@heraldcorp.com)