Local car insurance companies strengthen 'Insurtech'

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By Anna J. Park

Seeking to maintain profitability during the pandemic era, auto insurers are now paying more attention to the concept of “Insurtech,” which can yield precise analyses of insurance holders' driving patterns. Insurtech refers to technological innovations that are created and implemented to improve the efficiency of the insurance industry.

Behavior-based insurance (BBI) is the latest such innovation, which analyzes numerous variables and factors that determine appropriate premiums for each insurance holder. BBI is an improved version of usage-based insurance (UBI), which is focused more on gathering rather traditional information, such as mileage and the age of a driver.

BBI allows for a more complex set of information surrounding driving behavior patterns, creating more predictable scenarios. The tech-based model that monitors driver behavior with objective driving patterns and records is being hailed in advanced global insurance markets, as both insurance companies and insurance holders could jointly benefit from the innovation.

Relying on a range of real-world data, such as speeding and acceleration behavior and patterns among other things, the latest driving analysis technology is able to provide more accurate information, resulting in more appropriate premiums for insurance holders, while lowering risk levels on the part of insurers.

Local auto insurers had been posting a deficit for a long time, although the market sentiment has shifted a lot during the pandemic era. Due to social distancing practices, auto insurance companies also logged an improvement in their loss ratios. As a result, the aggregate operating profit of the local auto insurance industry turned to 398.1 billion won ($303 million) last year, the first time to log a net profit in four years.

As the improved profitability of the industry is threatened again with the ending of social distancing this year, the auto insurance sector is ramping up its tech-based approach to maintain profitability.

Although local regulations on private information could still be an obstacle to the BBI auto insurance market, many local insurers have been focusing on developing BBI insurance plans for the future. Carrot General Insurance has been running pilot programs of a BBI insurance plan since last year, aiming to officially launch a so-called Insurtech-based insurance plan.