Kakao's Entry into the Insurance Industry, Insurers Say "The Inevitable Has Come"

[Asia Economy Reporter Changhwan Lee] The insurance industry is on high alert as Kakao has received approval to enter the non-life insurance business. There are growing concerns that if Kakao begins to actively sell insurance products to its more than 40 million KakaoTalk users, it could significantly erode the market share of existing insurers.

According to industry sources on the 14th, the Financial Services Commission held a regular meeting the previous day and decided to grant Kakao Non-Life Insurance (tentative name) the license to operate in the insurance business. The Commission explained that it officially approved the license after determining that Kakao Non-Life Insurance met all requirements, including capital adequacy, business plan feasibility, and sound management standards.

This marks the first time a new entrant, rather than an existing insurer, has been granted a digital insurance license.

Kakao Non-Life Insurance is expected to officially enter the non-life insurance market in the third quarter. Initially, it is anticipated to launch simple mini digital insurance products targeting over 40 million KakaoTalk users and more than 30 million KakaoPay users.

Representative products include travel insurance, mobile phone damage insurance, children’s insurance, taxi safety insurance, and bike insurance. The company is also expected to promote a convenient claims service by partnering with hospitals to issue mobile documents and certificates and send electronic claims directly to insurers.

Users will be able to easily purchase insurance through KakaoTalk or KakaoPay, with the major strengths being rapid claim payments utilizing artificial intelligence (AI). In the long term, there is a strong possibility of expanding into traditional non-life insurance sectors, such as automobile insurance, where existing insurers currently hold advantages.

The non-life insurance industry views Kakao Non-Life Insurance as a potential market disruptor leveraging Kakao’s powerful platform, which could threaten the position of existing insurers.

An official from a domestic non-life insurer said, "Since Kakao Non-Life Insurance has the familiar and easily accessible KakaoTalk platform, it is expected to quickly establish itself in the non-life insurance market," adding, "Insurers are very concerned."

Researcher Kwangmyung Jeong from DB Financial Investment stated, "In the early stages, the focus will be on mini insurance products such as lifestyle-related insurance rather than products like automobile or long-term insurance," and added, "Considering the possibility of launching insurance products linked to the Kakao ecosystem, meaningful growth in the mini insurance market is achievable."

As Kakao expands into banking, securities, and now insurance, resistance and rejection from the financial sector toward big tech companies are expected to intensify. Existing financial firms criticize the uneven playing field, pointing out that while IT companies face numerous regulations limiting their entry into financial services, big tech firms are entering the financial industry with relative ease.

While the emergence of a strong competitor poses a challenge to existing insurers, there is also a sentiment that consumers will benefit.

Another insurance industry official said, "The fact that a big tech company like Kakao, which owns a platform, is entering the non-life insurance market is significant in itself," and added, "Being a familiar and well-known big tech company gives it an advantage in accessibility for insurance consumers."