The insurance industry has reported a sharp decline in net profits in the first half of the year, raising concerns over its overall performance and the potential impact of the government's proposed increase in the education tax rate.
On August 18, financial sector sources said insurers opposed the planned tax hike, arguing that it could undermine industry stability and raise questions about tax fairness.
The Ministry of Strategy and Finance has unveiled a tax reform plan that will introduce a KRW1tn ($720m) income bracket for financial companies’ education tax starting next year, doubling the tax rate in that bracket from 0.5% to 1%.
Under the proposal, the additional burden for the top five non-life insurers, including Samsung Fire & Marine, Hyundai Marine & Fire, DB Insurance, KB Insurance, and Meritz Fire & Marine and six life insurers such as Samsung Life, Hanwha Life, and Kyobo Life is estimated at around KRW350bn, based on simple calculations.
The Non-Life Insurance Association submitted feedback to the Ministry of Strategy and Finance, warning that the proposed increase in the education tax rate could affect the financial soundness of insurers.
The insurance industry has raised concerns that the recent hike in the education tax rate, combined with stricter K-ICS ratio requirements related to loss ratios, lapse rates, and discount rates, could undermine insurers’ financial soundness and weaken their role in providing a social safety net.