Insurance entry barriers to be lowered

By Kim Jae-won

The financial regulator said Monday that it will issue licenses for small insurers specialized in the coverage of certain products like bicycles and glasses to reflect diverse demands for customized services.

The Financial Services Commission (FSC) said that it will loosen regulations and lower entry barriers for non-life insurers by reducing minimum capital.

“We plan to allow insurers to launch businesses covering specific products like bikes, glasses and travel insurance without having to meet current big capital requirements,” said Kim Dong-hyun, an official of the FSC.

However, Kim declined to disclose how much the minimum capital requirement will be. Currently, insurers with 30 billion won ($27 million), or more of capital can apply to be comprehensive insurers.

Experts welcomed the decision, hoping it provides services for an increasing number of bike riders.

“This is good news for bike riders, including me, whose numbers are on the rise. It may help riders to be protected from accidents happening in key routes, including the Han River,” said Kim Jae-hyun, an associate professor of insurance studies at Sangmyung University’s Cheonan campus.

The number of bike accidents reached 13,316 in 2013, up 3.2 percent from a year ago, according to KoRoad, the government transportation safety agency. The number of people killed in the accidents marked 282 during the same period ― a 2.1 percent death rate, the agency said.

But the professor was doubtful for the prospects of the business because the loss ratio for bike insurance is expected to be high.

He said that insurers will also struggle to control moral hazards of bicycle riders who claim inappropriate compensation.

Market watchers agreed with Kim, saying the deregulation may have little impact on the market because their portions are not big enough to change circumstances in the business.

“I don’t expect a huge difference in the market with launches of insurance companies specialized in bikes and glasses,” said Byun Cheol-seong, a researcher at Korea Insurance Research Institute.

Non-life insurance companies, including the two major players of Hyundai Marine & Fire Insurance and Samsung Fire & Marine Insurance, sell bike insurance products, but the number of contracts has dwindled for the past few years. According to industry data, the number of bike insurance contracts marked 5,500 in 2013, about one third of 2009 when it reached 16,000.