Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Banking group rush to join digital insurance sector
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By Anna J. Park
By Anna J. Park
Aiming to attract the country's younger generations, major financial groups are dashing to set up digital insurance units under their umbrellas.
As adults aged under 40 are more familiar with digital-based platforms than the traditional face-to-face sales strategies of ordinary insurance companies, the insurance sector is bracing for heightened competition in the digital market. According to data compiled by Korea Insurance Research Institute, those in their 20s and 30s show a much lower percentage of holding life insurance policies than their elders. They also showed the highest rate of buying insurance online through digital platforms.
In order to welcome them as new customers, Shinhan Financial Group acquired BNP Paribas Cardif General Insurance in late October, with plans to transform it into a digital insurance company providing innovative insurance policies and services.
Hana Financial Group aims to build a digital-based platform out of its insurance subsidiary Hana Insurance, formerly The-K Non-Life Insurance, which the group acquired early last year.
Big tech company Kakao's payment unit Kakao Pay also plans to set up a digital insurance firm next year. Kakao Pay submitted an application earlier this month to the financial authorities for setting up the firm within the first quarter of next year.
As this would be the first time a big tech conglomerate attempts to advance into the digital insurance market, traditional players in the local insurance sector are closely watchful of Kakao's moves.
If granted the qualification by the financial authorities, it will be the third digital insurance firm in Korea, following Kyobo Life Planet launched in 2013 and Carrot Insurance founded in 2019. Kyobo Life Planet and Carrot Insurance are each subsidiaries of traditional insurance companies Kyobo Life and Hanwha Life.
However, the weak profitability of digital insurance firms, especially in early stages of operation, has emerged as a disincentive. Kyobo Life Planet hasn't yet succeeded at making a turnaround, still logging revenue losses. It logged a loss of 11.3 billion won ($9.4 million) by the end of the third quarter of this year. Its accumulative loss during the past eight years of operation has exceeded some 100 billion won. Carrot Insurance also recorded a net loss of 38.1 billion won last year, and 38.4 billion won in the first three quarters of this year.
Market watchers say a digital insurance firm might need to embrace annual losses for five to 10 years, as online purchase of insurance policies is not yet mainstream in the country. Thus it is expected that only a sizable financial giant, able to bear the continual losses, would continue to weather market challenges.