New Insurers to Drive Digitalisation in South Korea Non-Life Segment - AM Best report

KUALA LUMPUR, Jan 24 -- New and fully digitalised insurance companies entering South Korea’s non-life industry hold the potential to exacerbate a highly competitive marketplace in the long term, according to a new AM Best report.

In its Best’s Special Report, “New Insurers to Drive Digitalisation in South Korea Non-Life Segment,” AM Best notes that technology giant Kakao Corp, which runs South Korea’s dominant mobile messenger app, KakaoTalk, is planning its foray into the non-life insurance segment in the first half of 2022, leveraging its user base and digital ecosystem.

Several other players have entered or are planning to enter South Korea’s digital non-life business segment, offering products such as pay-per-mile auto insurance with a monthly deferred payment scheme.

According to a statement, the report also states that large financial groups are increasingly expressing interest in the digital non life business.

Digital insurers typically concentrate on simple and small-ticket insurance products when they enter the market, according to the report, and as a result, these new players will require time to amass a sizeable premium base in order to cover the upfront investment in technology and ultimately make meaningful profits.

At the same time, according to the report, a digital insurer that is able to accumulate a large policyholder base quickly while preparing to expand into major product lines could find itself able to compete meaningfully against traditional incumbents.

The report also notes that digital insurers likely will turn first toward auto insurance, given that auto policies are mandatory and that online sales are more easily accepted; however, claims management expertise among traditional players will remain a barrier for new entrants.

While AM Best does not expect new digital insurers to have a material impact on overall competition in the short term, they could motivate existing players to reexamine their business structures and strategies.

Innovative products and services introduced by new digital entrants could inspire traditional insurers to accelerate their innovation efforts and increase insurance penetration in areas that historically have been underinsured.

More details at www.ambest.com.

-- BERNAMA