November 25, 2024

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An old woman holds a heart-shaped balloon in hand. (123rf)

Insurance companies are seeking to capture business opportunities in the senior care and retirement community industry with the country quickly approaching having the world's oldest population.

Tucked into a quiet neighborhood in central Seoul, KB Financial's arm for senior nursing care, KB Golden Life Care, will launch a five-story housing complex at the end of this month.

The retirement community -- KB Pyeongchang County -- will house 164 sets of senior residents as either singles or couples. Two floors are devoted entirely to community facilities including: a dining hall, gym, sauna and spa, medical services, cafe and lounge for leisure activities.

Even before its official opening, around half of the rooms have already been reserved by people who are likely to sign contracts for them, according to KB Life Insurance, the parent company of KB Golden Life Care.

“We consider this quite significant as most 'silver towns' (Korean for retirement communities) here usually take around 2-3 years to fill 80 percent of the housing,” an official from KB Life Insurance told The Korea Herald.

Insurance firms dive in

The senior care and retirement community industry has been growing exponentially in the past years, logging an annual average growth of 15.6 percent from 2018 until 2022, when it grew to 14.5 trillion won ($11.12 billion) in market size.

With the KB subsidiary at the lead, the local life insurance companies have been seeking inroads into the nascent business as a new source of profit amid sluggish income from its traditional products.

Shinhan Life, the insurance arm of Shinhan Financial Group, in January registered with the Financial Services Commission for a license in the nursing business, while Samsung Life, the country’s No. 1 insurance firm, announced during its earnings conference call in November that it is closely monitoring the industry as it prepares to put together a task force dedicated to the new business next year. NongHyup Life Insurance also launched a new business team for nursing under the company’s management and planning department.

A rendering shows KB Pyeongchang County, a retirement community located in Pyeongchang-dong, Jung-gu, Seoul. (KB Life Insurance)

Such large insurance companies are rising as strong players, as regulations on starting businesses in the field have raised the bar higher for smaller companies and individuals.

There are mainly three types of senior care facilities – medical nursing homes, day and night care centers and senior welfare homes -- defined under South Korea's Welfare of Senior Citizens Act.

To open what the act calls senior welfare homes, retirement communities funded by residents, the law requires full ownership of the land upon which the facility is built or to lease public land. The rule also applies to other types of senior care facilities that house over 30 residents.

“The initial cost just to buy the land and the building is around 20 billion won. Even for the big firms, they can’t expect a high return in the near future and it’s not really a business that they start by weighing the profitability,” a source from the insurance industry said under anonymity.

Baby boomers set trend

The care business is expected to expand further, with the country’s population of older adults increasing rapidly. The proportion of those aged 65 or over took up 18.4 percent of Korea's total population this year, making Korea a super-aged society, with the figure set to rise to 20 percent in 2025.

The transition of the country's baby boomers -- defined in Korea as those born between 1955 and 1963 -- into the senior population is expected to accelerate the demographic shift. According to a Hana Institute of Finance report, those of the baby boomer generation will have all turned 65 by 2028.

Experts anticipated that the insurance sector would try to meet the diverse needs of baby boomers.

“Baby boomers tend to be (relatively) highly educated and more well-off (compared to the previous generation). As they enter the senior age group, the overall total assets of the elderly will expand, leading to an increase in demand for more accessible nursing and residential institutions in urban areas,” said Jung Seung-hee, a chief researcher at the Hana Institute of Finance.

Unlike in the past when moving to the countryside was accepted as a norm for older adults, many of them these days prefer the lifestyle and conveniences of the city.

“They call that ‘secluding oneself in nature’ nowadays,” the KB Life Insurance official said. “Just like the phrase, ‘aging in place,’ elders strongly wish to continue living where they have lived, and we also selected the locations based on this idea.”

On top of the retirement community in Pyeongchang-dong, which is an upscale residential area in Jung-gu, the KB insurance firm also operates two medical nursing homes – called “villages” in English – in Seoul’s Seocho and Wirye, and a day and night care center in Gangdong in eastern Seoul.

An image of old people and nurses at a nursing home. (123rf)

With some 5,000 on the waitlist for the 180 units in the two Villages, the company said it plans to open three more nursing homes and centers each in the capital by 2025.

Shinhan Life is also aiming to open its first senior welfare housing complex in Eunpyeong-gu, northwestern Seoul, by around 2027, and further expand the business to other parts of the capital and the suburbs, a publicity official from the firm said.

Improving quality, reducing cost

Making senior care and retirement communities more affordable is also a major task at hand for the insurance firms.

Right now, resident-funded retirement communities are considered luxury residences for the affluent, with around 200-300 million won ($153,000-$229,700) in deposit funds required on average and a monthly fee – covering rent, fixed meals and other services – of 2-4 million won. The most expensive, The Classic 500 in Gwangjin-gu, Seoul, has its deposit set at 900 million won.

While fees for nursing homes and care centers are in part covered by public long-term care insurance, those who need help but are not eligible for full benefits must take on the burden themselves.

In the case of KB Pyeongchang County, residents can enter for a deposit of around 30 million won.

“Many residents of retirement communities are pensioners who have a set monthly income. We aimed to lower the price hurdle so that more people on fixed incomes might also utilize the facility,” the KB official explained. She added that the ultimate goal for KB Life Insurance will be improving the average quality of services, while reducing the cost burden for individuals.

The government’s recent push to ease regulations in the finance sector is also expected to spur big firms' inroads into the senior care and retirement community industry.

In August, the Ministry of Health and Welfare pledged it will review policy improvements for the establishment of facilities in the urban areas and other regions where there are supply shortages to improve the public long-term care system.

Kim Seog-young, a senior researcher at the Korea Insurance Research Institute, emphasized that cooperation between the companies and the government is essential to bolster and stabilize the social safety net for older people.

“While insurance firms should pursue new business strategies accordingly to the demographic shift, … the government should (also) respond to expanding demand by diversifying its supply system, providing new incentives to encourage the private care services and achieving a balance with the private sector,” Kim said.

By Choi Ji-won  (jwc@heraldcorp.com)