[Exclusive] Kakao Pay to Launch Pet Insurance in April... Partners with Top 5 Non-Life Insurers

Pet Insurance Sales on Insurance Comparison and Recommendation Platforms
Domestic Pet Insurance Enrollment at 1%... Industry Calls It a "Blue Ocean"
PM Rate and Commission Rate Negotiations Are Key

Starting with auto insurance earlier this year, a new insurance comparison and recommendation platform will add pet insurance from April. Among fintech companies, Kakao Pay is the first to partner with the top five domestic non-life insurance companies to launch products. Unlike auto insurance, which saw poor performance due to conflicts over platform (PM) rates and commissions, there is growing interest in whether pet insurance can achieve success.

According to a report by Asia Economy on the 5th, the top five domestic non-life insurers?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, DB Insurance, and Meritz Fire & Marine Insurance?recently agreed with Kakao Pay to introduce pet insurance on the comparison platform starting in April. Among the "Nekato" group (Naver Pay, Kakao Pay, Toss), Kakao Pay is the only one launching pet insurance next month. Naver Pay and Toss plan to introduce it in the second half of the year. Other small fintech companies are expected to join after observing the success of pet insurance.

Pet insurance is a product that covers veterinary treatment costs for pets, liability for damages caused to others' pets, funeral expenses, and more. Currently, 11 non-life insurers sell pet insurance in South Korea. By securing contracts with the big five, Kakao Pay has been able to offer a full range of products. A Kakao Pay representative said, "We plan to gradually increase the number of insurers and product lines starting with the big five pet insurance products."

The pet insurance subscription rate in South Korea is still in the 1% range, making it a blue ocean market for the non-life insurance industry. As the number of pet owners increases, pet insurance has recently grown rapidly. The gross written premium for pet insurance rose sharply from 1.12 billion KRW in 2018 to 15.395 billion KRW in 2020 and 28.754 billion KRW in 2022. During the same period, the number of insurance subscriptions increased from 7,005 to 35,415 and then to 71,896. In 2022, there were 6.02 million pet-owning households and 15 million pet owners in South Korea, meaning one in four citizens owns a pet. As of 2022, the estimated number of pet dogs is 5.45 million and pet cats 2.54 million.

However, there are challenges to overcome for pet insurance to succeed on comparison platforms. One issue is the PM rate. The PM rate is a platform-exclusive insurance rate that is more expensive than purchasing insurance directly through individual insurers via face-to-face, direct channels (CM), or telemarketing (TM). When auto insurance was added to the comparison platform in January, the introduction of PM rates by the big four insurers?Samsung Fire & Marine, Hyundai Marine & Fire, DB Insurance, and KB Insurance?sparked controversy. The contract rate for auto insurance was only 5% compared to users during the first month after the platform's launch, indicating poor performance.

The big five insurers and Kakao Pay plan to begin negotiations on pet insurance premium rates and commission rates this month. A representative from a major insurer said, "From our perspective, since we pay commissions to the platform, it is natural to set PM rates higher," adding, "Pet insurance will likely be no different." Another major insurer representative said, "Although contract terms vary by insurer, insurers are unlikely to act differently regarding the application of PM rates."

Some believe that pet insurance negotiations could result in a win-win situation for insurers and fintech companies. An insurance industry insider said, "Unlike the fiercely competitive auto insurance market, pet insurance is still in its early stages," adding, "If insurers decide that growing the market through platforms as well as their own channels is important, a smooth agreement on premium rates and commissions will be reached."