Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Digital insurers struggle with net loss despite growing profitability across entire market
gettyimagesbank
By Yi Whan-woo
Insurance customers still prefer in-person services
Digital insurance companies are failing to make a profit while the overall insurance market is increasingly generating revenue.
The challenges faced by digital insurers are in stark contrast to the growing profitability witnessed among internet-only banks, whose net profit surged from 82.3 billion won ($60.8 million) to 350.2 billion won between 2022 and 2023.
Industry analysts assessed that insurance customers, unlike banking customers, still prefer in-person services even in the digital era.
“An insurance contract lasts for years and even for decades, and clients want to make sure they clearly understand terms and conditions by asking questions to insurance agents face-to-face,” an official of an offline insurer said.
He added, “Considering the insurance sales environment, one may be able to understand why digital insurance companies have not been successful since the business started more than 10 years ago.”
He was referring to Kyobo Life Planet, the country’s first digital insurer launched in 2013. It is also one of the five key digital insurance market players, along with Hana Insurance, Kakao Pay Insurance, Carrot Insurance and Shinhan EZ General Insurance.
Kyobo Life Insurance was never in the black thereafter, including 2023 when it posted a net loss of 21.4 billion won. The figure was up 9.3 billion won from the previous year.
Also in 2023, Hana Insurance suffered a net loss of 87.9 billion won, which marked a 37.3 billion won increase year-on-year.
The net loss of Kakao Pay Insurance jumped from 26.1 billion won to 37.3 billion won in the 2022 to 23 period.
Both Carrot Insurance and Shinhan EZ General Insurance struggled with net losses over the cited period, although the amount decreased from previous periods.
Carrot Insurance shed 3.9 billion year-on-year to 76 billion won, while Shinhan EZ General Insurance fell by 5 billion won to 7.8 billion won.
The five companies posted a combined net loss of 229 billion won in 2023, compared to the entire insurance industry, whose year-on-year net profit grew 45.5 percent to 18.3 trillion won.
Industry analysts speculated that digital insurers can’t resolve the problem of unprofitability on their own and that they may need to consult financial regulators to reform corresponding hurdles.