Recent economic contraction in South Korea is expected to heavily impact sales in several lines of insurance, says analyst.

GlobalData’s Pratyusha Mekala stated that a decrease in the country’s national output in manufacturing and international trade will have the biggest impact.

“The export-led South Korean economy contracted by 1.4% in the first quarter of 2020, as compared to the previous quarter.

“Contraction in key sectors like manufacturing and international trade is expected to heavily impact insurance sales of motor and marine, aviation and transit business lines.”

Mekala added that motor insurance sales will be further reduced by a reduction in vehicle manufacturing, pointing to the view of the Korea Automobile Manufacturers Association, which said $34bn could be needed to restore business operations among motor manufacturers over the next three months

The bancassurance and agency channels, which account for more than 50% of industry premiums are another area hit by Covid-19, as people are less inclined to buy in person.

But despite all of the reasons Mekala believes the sale of insurance will take a hit, she said providers of general coverage “may not get equally impacted” due to lower expected claims.

“Motor insurers are expected to register lower claims due to the restricted mobility, while health insurers are expected to face lower claims due to the predominant role of public healthcare in the current outbreak,” she added.