U.S., Low Interest Rate Continues to Occupy Half of Market

In the advanced nation of insurance, U.S.A., variable life insurance was first introduced in 1976.

As universal insurance, which is possible of free deposit and withdrawal in the range of refunds, was introduced three years later in 1979, commodity sales were, then, mainly dominated by the combination of variable and universal insurances, variable-universal insurance. The same combined system of life insurance takes up 50 Per Cent of the current insurance market.

When variable insurance was introduced in the U.S., 12 Per Cent of high interest rate and 13.3 Per Cent of continuous inflation acted as its background in the late 1970s. As insurance commodities that secure fixed interest lost their charm, contract cancellation increased greatly. After canceling their contracts, policyholders began to deposit money at Money Market Fund (MMF), introduced by banks or security corporations as new financial commodity. Insurance companies reacted quickly, and put out variable insurance, which can invest part of premium in stocks or other financial commodities.

Insurance companies came to rely more heavily on sales of variable insurance, as they confronted serious interest pressure when low interest-rate situation continued after the mid 1980s.

Byong-Ki Lee eye@donga.com