Minimum Capital Requirement for Mini Insurance Business Relaxed to 1 Billion Won
Mini Insurance Gains Attention Through Online Sales in the Contactless Era
[Asia Economy Reporter Oh Hyung-gil] Mini insurance, which provides coverage for specific cancers and other conditions with a monthly premium of less than 10,000 KRW, is emerging as a product well-suited for the non-face-to-face era. Recently, regulations have been relaxed to allow the establishment of insurance companies with small capital, accelerating the emergence of mini insurance products.
According to the Financial Services Commission on the 26th, the "Insurance Business Act Amendment," which significantly relaxes the minimum capital requirement for insurance businesses to 1 billion KRW, has passed the National Assembly’s Political Affairs Committee. The amendment will proceed through the Legislation and Judiciary Committee and the plenary session before promulgation, and will take effect six months after promulgation.
Under current laws, operating an insurance business requires capital of 20 billion KRW for life and automobile insurance, 10 billion KRW for disease insurance, and 5 billion KRW for theft insurance. It has been pointed out that these requirements make it difficult for new entrants to enter the insurance market.
However, with the relaxation of capital requirements, it is expected that new entrants will be activated. In particular, the number of insurers handling small-scale and short-term insurance is expected to increase.
There is a high possibility that more lifestyle-oriented mini insurance products will be launched, similar to Japan. Currently, Japan has lowered entry barriers for small-amount short-term insurance, selling various mini insurance products such as weather insurance, security insurance, and bicycle insurance.
In the non-face-to-face era, the number of people accessing mini insurance through online sales is also increasing.
According to the Life Insurance Association, looking at the performance of life insurers’ non-face-to-face sales channels over the past five years, the initial premium increased from 7.6 billion KRW in 2015 to about 16.9 billion KRW in 2019, showing a continuous growth rate of 123.6%.
Mini insurance simplifies coverage, has a relatively short insurance period of 6 months to 1 year, and features small premiums such as 200 KRW per month or 9,900 KRW per year. It is also called simple insurance or small-amount short-term insurance.
It is characterized by offering personalized services through products designed to cover only the necessary protection for specific cancers.
When purchasing insurance online, identity verification can be done with just KakaoPay authentication without a public certificate, and insured persons can enroll immediately without diagnosis or underwriting, avoiding rejection. Electronic coupons at affordable prices of 10,000 to 20,000 KRW annually can also be gifted.
Due to the nature of online sales channels, sales commissions are reduced, and even if the policy is canceled early, principal protection benefits are available from one month after enrollment.
Recently, unlike traditional insurance, mini insurance products have appeared that group subscribers and settle premiums at maturity for consumers who did not trigger insurance payouts based on the amount of insurance claims paid.
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