Just Left Alone, 12.85 Million Won Becomes 23.3 Million Won... Variable Insurance Emerges as a Star Performer in Bull Market

Variable Insurance Once Seen as a Burden
Special Account Valuations Surge Amid Stock Market Rally
Long-Term Policyholders Increasingly Weighing Cancellations and Withdrawals
Insurers Warn: "Be Cautious About Deciding Based Solely on Surrend

#In 2007, Mr. A signed up for a variable critical illness insurance policy with Daehan Life Insurance (now Hanwha Life Insurance). Last month, he was surprised when he checked the insurance company’s application (app) and saw that the special account reserves, which reflect the investment performance of his special account contributions (12.85 million won), had nearly doubled to around 23.3 million won. Variable insurance is an investment-oriented insurance product in which a portion of the premium paid by the policyholder is invested and managed in a special account separate from the general account, investing in stocks, bonds, and other assets. Recently, as the vehicle he owns has been experiencing frequent breakdowns, Mr. A is contemplating whether to make a partial withdrawal from his reserves—especially while the stock market is strong—to help fund the purchase of a new car.

Amid the recent stock market rally, there have been consecutive cases of substantial growth in variable insurance reserves. Getty Images

Thanks to the strong domestic stock market, the net asset value of variable insurance funds is on the verge of surpassing 120 trillion won for the first time ever. As the valuation of special accounts has grown due to rising stock prices, more policyholders who have maintained their variable insurance policies for a long time are considering either surrendering their policies or making partial withdrawals. However, experts advise that policyholders should carefully review the terms of their contracts, as partial withdrawals or policy cancellations can result in reduced coverage and the deduction of business expenses.

According to the Korea Life Insurance Association on June 16, the net assets of variable insurance funds at 20 domestic life insurers increased by 15.6% from 100.1211 trillion won at the end of 2024 to 115.7855 trillion won at the end of 2025, and reached an all-time high of 119.531 trillion won at the end of the first quarter this year. In particular, the net assets of funds invested in domestic assets grew by more than 16 trillion won, rising from 74.4562 trillion won at the end of 2024 to over 90 trillion won at the end of the first quarter this year. With continued gains in stock prices, the net asset value of variable insurance products investing in stocks and bonds has also increased significantly. The KOSPI index soared more than 90% in just one year, jumping from the 2,556 level at the end of March 2023 to above 5,000 at the end of the first quarter (March) this year.

The stock market boom has also led to an increase in variable insurance sales. According to the Korea Life Insurance Association, first-year premiums for variable insurance rose by 46.2% (912.4 billion won), from 1.9728 trillion won in 2024 to 2.8852 trillion won in 2025. In particular, variable annuity insurance accounted for 2.0322 trillion won and variable universal insurance for 723.8 billion won, driving this upward trend. First-year premiums are an indicator of demand for new insurance policies, and the expectation of higher returns due to the bullish stock market appears to have fueled the expansion of variable insurance sales. Compared to 2022, when the stock market was sluggish and first-year premiums totaled 990 billion won, the figure has surged to about three times that level.

As contracts that remained in loss territory until last year have now turned profitable, an increasing number of policyholders are considering surrendering their policies or making partial withdrawals. Many variable whole life insurance and variable critical illness insurance products sold in the early 2000s suffered from poor long-term returns, with reserves often failing to reach the level of principal paid in. On top of this, demand is rising from elderly policyholders who need to secure living expenses after retirement.

In fact, surrender payments for variable insurance fell from 12.9836 trillion won in 2024 to 11.1402 trillion won last year, but reached 3.8945 trillion won in just the first quarter of this year. This is roughly 35% of the total annual surrender payments for last year. If the current trend continues, annual surrender payments could surpass last year’s total. In other words, the bull market has increased both sales and cancellations of variable insurance. A surrender payment is the amount returned by the insurer to the policyholder when the insurance contract is terminated during the policy period.

An official at the Korea Life Insurance Association said, “In the past, cancellations weren’t even considered because policies were at a loss, but now, as reserves have increased significantly, there has been a rise in consultations over surrenders or partial withdrawals.”

However, it has been pointed out that surrendering a policy should be approached cautiously, as it could leave a gap in coverage. For protection-type insurance such as cancer insurance or whole life insurance, surrendering a policy and then aging or developing a medical history could make re-enrollment difficult or result in a substantial premium increase.

Partial withdrawals also require careful consideration, as business expenses and risk premiums are deducted and the amount withdrawn can reduce future coverage. Although specifics vary by product, business expenses for variable insurance typically account for about 8–10% of premiums paid. Furthermore, policyholders cannot freely withdraw all reserves from their special account. Factors such as the number of allowed partial withdrawals, maximum withdrawal amount, and minimum required reserves differ by policy, which can affect the actual amount that can be withdrawn.

A representative of a domestic life insurance company said, “It is important not to focus solely on the surrender payment and cancel a policy without considering deductions for business expenses and reduced coverage. In particular, since partial withdrawals can reduce future death benefits and other coverage amounts, it is crucial to check your contract terms thoroughly.”

This content was produced with the assistance of AI translation services.