Premiums on savings-type insurance and short-payment whole life policies are expected to rise by up to around 10% next year, as the average disclosed interest rate — which functions as a benchmark rate for insurers — declines again. Industry watchers say higher premiums, coming on top of rising interest burdens, could deepen difficulties for vulnerable households.
The Financial Supervisory Service has set the average disclosed rate for 2027 at 2.25%, financial industry sources said on the 28th. That is 0.25 percentage points lower than this year's 2.5% and the lowest level in four years, since 2023.
Insurers set their disclosed rates based on factors including asset management performance. The average disclosed rate is a weighted average of the figures published by each insurer, making it a lagging indicator. A decline means the returns insurers can expect from managing their assets have fallen.
Insurers set an expected investment return in advance and reflect it in premiums. This is known as the assumed interest rate, and a drop in the average disclosed rate leads to a lower assumed rate, thinner insurer margins and ultimately higher premiums. Unless insurers absorb losses or investment returns recover quickly, they cannot pay the benefits promised to policyholders without collecting more in premiums.
The industry estimates that a 0.25 percentage point drop in the assumed rate pushes premiums up by 5% to 10%. The impact is seen as particularly large for savings-type insurance and short-payment whole life policies. Savings-type insurance guarantees a minimum return while paying benefits either upon death during the coverage period or at maturity. "With insurers already preparing premium increases as loss ratios climb, a lower average disclosed rate could strengthen their case for raising premiums," an industry official said.
