Kakao's non-life insurance biz taking shape - Korea Times
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Kakao's non-life insurance biz taking shape

By Lee Kyung-min

The Financial Services Commission (FSC) said Thursday that it has granted preliminary approval for Kakao's plan to set up a non-life digital insurance firm, clearing the way for the IT giant to expand in a niche online market easily accessed by young customers seeking short-term, cheap liability products.

The success of the insurance business will hinge on how fast and accurately the firm identifies subscriber demands, propped up by a targeted marketing scheme that best utilizes Kakao Talk, Kakao's messenger service with the largest market share.

The FSC said it approved Kakao's plan in a regular meeting Wednesday, as the firm met requirements on capital, business plan feasibility and sound management.

The envisioned insurer with a capital of 100 billion won ($89 million) will be set up by Kakao Pay and Kakao Corp. Kakao Pay will put up a respective 60 percent of the capital and Kakao Corp. 40 percent.

"The insurance firm to be set up by Kakao is expected to contribute to promoting consumer benefits, competition in the industry and innovation through its insurance services linked to Kakao's digital technologies and platforms," the FSC said.

The newcomer the FSC views could also play a positive role in revitalizing the non-life insurance market, long protected by a limited number of market players with rules set up and maintained to minimize their losses without competition.

The insurance products to be rolled out by Kakao are expected to include do-it-yourself (DIY) insurance where consumers can design the range of coverages and rates.

Examples include coverage against mobile phone damage and safety while using Kakao's ride-hailing service Kakao Mobility.

Also bolstering the business prospects is a simple billing system mediated by Kakao Talk and Kakao Pay, backed by quick and easy insurance eligibility screening using smart technologies.

Kakao should apply to the FSC for the main license within six months after meeting additional requirements involving capital investments, hiring and operation facilities.

Most affected by Kakao's market entrance will be existing non-life digital insurers, notably Carrot General Insurance run by Hanwha, one of the top three players in the life insurance industry alongside Samsung and Kyobo.

Also unnerved are small and medium-sized non-life insurance companies.

"Hanwha's Carrot will feel the most threatened," an industry official said. "If Kakao Insurance releases similar products involving car insurance, Kakao will be able to dwarf the Hanwha affiliate in an instant, while it remains to be seen how many of Carrot's more than 200,000 subscribers will switch."

The number of new subscribers to the Hanwha affiliate surged after the firm rolled out products allowing premiums to drop if insured clients are not involved in any accidents.

Carrot logged a net loss of 38.12 billion won last year. It reported 39.5 billion won in operating profit mostly from insurance premiums, but spent 77.8 billion won in operating expenses on insurance payouts and other business expenses.

According to FnGuide, a financial information data service provider, Kakao is expected to report over 1.2 trillion in sales and an operating profit of 157.5 billion won in the first quarter of this year. These are year-on-year increases of 45 percent and 79 percent, respectively.

Lee Kyung-min lkm@koreatimes.co.kr

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