[Exclusive] KakaoPay Applies '10% Refund Rule' to 'Driver Insurance' as Well

Kakao Pay Sonbo Announces Driver Insurance Launch Early This Month
10% Refund on Premiums for No-Accident Drivers
Standing Out as a 'Catalyst' in the Insurance Industry

Kakao Pay Insurance has decided to apply the '10% refund rule' to the driver insurance scheduled for release earlier this month. Similar to the overseas traveler insurance and mobile phone insurance launched last year, 10% of the paid premium will be refunded to customers if no claims are made. This strategy is interpreted as an effort to solidify its position as a 'disruptor' in the insurance industry through customer-tailored products and refund strategies based on Kakao's big data.

[Exclusive] KakaoPay Applies '10% Refund Rule' to 'Driver Insurance' as Well

[Photo by Pixabay]

Kakao Pay Insurance Announces Entry into 'Driver Insurance' Early This Month

According to a report by Asia Economy on the 4th, Kakao Pay Insurance will introduce a 'Safe Driving Discount Refund' in the driver insurance set to launch early this month. If customers do not file any claims during the insurance period, they will receive 10% of the paid premium back at maturity. A Kakao Pay Insurance official explained, "It is both an encouragement for drivers to maintain a claim-free record and a congratulatory gesture for those who complete payments without accidents."

The driver insurance to be introduced by Kakao Pay Insurance is the first long-term insurance product since its launch in October 2022. Until now, the company has mainly offered short-term and small-amount insurance products, making this its first foray into long-term insurance. Unlike compulsory automobile insurance, which is renewed annually, driver insurance is an optional insurance that covers risks that may occur to vehicle drivers and is typically contracted for three years or more. It covers injuries to the insured and legal costs arising from accidents during driving.

Kakao Pay Insurance's choice of driver insurance appears to be due to the relatively low initial infrastructure costs compared to automobile insurance. The big four non-life insurers (Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance) hold 86% of the automobile insurance market, which requires significant initial investment in customer centers and partnerships with repair shops for emergency dispatch. Additionally, the loss ratio is high, resulting in poor profitability.

Unlike automobile insurance, where coverage among the big four insurers is similar, driver insurance offers flexibility to design innovative special contracts. Driver insurance covers criminal and administrative costs such as traffic accident support funds, driver fines, and attorney fees, and Kakao Pay Insurance is expected to introduce customer-tailored special contracts unique to its brand. It is also anticipated to absorb demand for driver insurance from Kakao Taxi and Kakao Daeri drivers. A Kakao Pay Insurance official stated, "We are also considering ways to link with Kakao Mobility in the future."

Driver insurance subscriptions have surged since the enactment of the 'Min-sik Act' in 2020, which strengthened penalties for child injury and death accidents in school zones. The driver insurance market size reached 5.1336 trillion KRW in 2022, a 13.9% increase compared to 4.5052 trillion KRW in 2020.

Service image of mobile phone insurance launched by Kakao Pay Insurance in December last year [Photo by Kakao Pay]

Kakao Pay Insurance Shakes the Market as a 'Disruptor' in the Insurance Industry

Kakao Pay Insurance first introduced the 10% refund rule in its overseas traveler insurance launched in May last year. Customers who safely return from their trips can receive 10% of their premiums back, which has gained high popularity. Within eight months of launch, Kakao Pay Insurance's overseas travel insurance surpassed 700,000 cumulative subscribers and overtook the established leader Samsung Fire & Marine Insurance in monthly new contracts to claim the top spot.

In December last year, Kakao Pay Insurance also applied the 10% refund rule (Cherish Discount Refund) to its mobile phone insurance. If the insured uses their phone without repairs during the contract period, they receive 10% of the paid premium back. Thanks to various discounts, the average daily subscriptions for Kakao Pay Insurance's mobile phone insurance tripled compared to the previous month.

The insurance industry is becoming tense as Kakao Pay Insurance attracts subscribers by applying the '10% refund rule' to its insurance products one after another. Returning paid premiums in cash is an unprecedented sales method in the insurance industry. Triggered by Kakao Pay Insurance, digital insurers such as Hana Insurance and Carrot Insurance have also introduced overseas traveler insurance priced below 10,000 KRW with exceptional benefits.

Offering insurance products in a DIY (Do It Yourself) manner is also one of Kakao Pay Insurance's strategies to secure price competitiveness. For example, a man in his 30s traveling to Japan for 3 nights and 4 days can purchase overseas traveler insurance from Kakao Pay Insurance for as little as 30 KRW if he selects only coverage for 'damages caused to others' with a 50 million KRW liability limit. If he opts for maximum coverage including accidents, loss, and infectious diseases during overseas travel, he can subscribe to insurance costing around 13,000 KRW. A Kakao Pay Insurance official said, "We will continue to introduce various lifestyle-oriented insurance products based on refunds and DIY this year."