Korea’s digital insurers disappearing amid regulatory hurdles, structural challenges

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Digital insurance companies in Korea have been shrinking amid steep regulatory hurdles and structural challenges, leaving only two insurers — Kyobo Lifeplanet Life Insurance and Kakao Pay Insurance — as the main players, industry officials said Sunday.

According to the Insurance Business Act, an insurance company is classified as a digital insurer if at least 90 percent of its total insurance contracts and premiums are obtained through methods such as telephone and computer communications.

In the first quarter of this year, only Kyobo Lifeplanet and Kakao Pay Insurance met these standards, as they each generated 100 percent of their sales through online channels.

The figure for Carrot General Insurance, the nation’s first digital non-life insurer, stood at 89.1 percent.

On Sept. 10, Hanwha General Insurance is set to absorb its subsidiary, Carrot General Insurance. Established in 2019, Carrot has faced ongoing losses and worsening financial health, leading to the decision to merge it back into its parent company.

Hana General Insurance and Shinhan EZ General Insurance, which once positioned themselves as digital insurers, are also scaling back their digital focus and increasing their reliance on in-person sales.

For Hana General Insurance, the proportion of premiums generated through telemarketing and online channels dropped from 80.8 percent in the first quarter of 2023 to 73.1 percent in the first quarter of this year.

As for Shinhan EZ General Insurance, telemarketing and online sales accounted for just 3.3 percent in the first quarter of this year, with over 95 percent of its sales dependent on face-to-face interactions.

Industry insiders noted that digital insurers’ survival is increasingly at risk, although they play a vital role in bringing diversity, consumer benefits and innovation to the market.

They said uniform solvency regulations in Korea apply equally to small-scale digital insurers and conventional insurers, which effectively limits the growth potential of digital insurers.

“When digital insurers invest in digital-related assets to expand their business, this leads to higher risk weights, which negatively impact their solvency metrics,” an official at the insurance industry said. “Given the relatively small size of these companies, it seems necessary to consider regulatory relaxations that reflect their unique operating conditions.”