Kakao Pay Applies for Digital Non-Life Insurance Company License... Impact on the Insurance Industry

Scheduled to Launch Early Next Year
Will It Become a Catalyst in the Insurance Industry?

[Asia Economy Reporter Ki Ha-young] Kakao Pay has applied for a digital non-life insurance company’s main license with financial authorities. With results expected as early as the beginning of next year, attention is focused on the potential impact on the insurance industry.

According to the industry on the 4th, Kakao Pay submitted the application for the digital non-life insurance company’s main license to the Financial Services Commission on the 1st. This is the first time for a new operator rather than an existing insurance company.

Kakao Pay plans to prepare and launch insurance products as soon as the license is granted. Initially, it will focus on small, short-term insurance closely related to daily life, then expand to long-term insurance such as mobility (auto insurance) and health insurance.

The industry expects that Kakao Pay is likely to increase its market share centered on its accumulated 37 million subscribers and 20 million monthly active users (MAU) as of September. Collaborative services with Kakao affiliates such as Kakao Mobility and Kakao Commerce are also seen as a threat.

However, there is also analysis that digital insurance companies will face many obstacles to securing competitiveness against traditional insurers.

NICE Credit Rating recently published a report titled "Digital Insurance Companies: Typhoon or Breeze," stating, "The launch of digital insurance companies is expected to provide tangible benefits to financial consumers and help consumers use financial services more easily," but also diagnosing that "continuous business expansion and profitability improvement, especially the development of new insurance services or system refinement and customer customization that traditional insurers have not provided, will be mid- to long-term challenges for digital insurance companies."

NICE Credit Rating predicted that if digital insurance companies pursue a direct competition strategy based on price competitiveness, competition to maintain and expand market position across the insurance industry will intensify. On the other hand, if they pursue a niche market strategy by offering new insurance products such as mini insurance, it is expected to create opportunities for existing insurers to also sell new insurance products.