HONG KONG--(BUSINESS WIRE)--New and fully digitalised insurance companies entering South Korea’s non-life industry hold the potential to exacerbate a highly competitive marketplace in the long term, according to a new AM Best report.
In its new Best’s Special Report, “New Insurers to Drive Digitalisation in South Korea Non-Life Segment,” AM Best notes that technology giant Kakao Corp., which runs South Korea’s dominant mobile messenger app, KakaoTalk, is planning its foray into the non-life insurance segment in the first half of 2022, leveraging its user base and digital ecosystem. Several other players also have entered or are planning to enter South Korea’s digital non-life business segment, offering products such as pay-per-mile auto insurance with a monthly deferred payment scheme. The report also states that large financial groups are increasingly expressing interest in the digital non-life business.
Digital insurers typically concentrate on simple and small-ticket insurance products when they enter the market, according to the report, and as a result, these new players will require time to amass a sizeable premium base in order to cover the upfront investment in technology and ultimately make meaningful profits. “These digital startups will need time to cultivate sufficient underwriting and claims capabilities to handle more complicated products,” said Chanyoung Lee, associate director, analytics, AM Best. “Consequently, these new players are unlikely to have a material impact on South Korea’s non-life market dynamics in the short to medium term.”
At the same time, according to the report, a digital insurer that is able to accumulate a large policyholder base quickly while preparing to expand into major product lines could find itself able to compete meaningfully against traditional incumbents. Additionally, the simultaneous emergence of multiple digital insurers may increase customers’ familiarity and accelerate digitalisation across South Korea’s non-life insurance segment. The report also notes that digital insurers likely will turn first toward auto insurance, given that auto policies are mandatory and that online sales are more easily accepted; however, claims management expertise among traditional players will remain a barrier to overcome for new entrants.
While AM Best does not expect new digital insurers to have a material impact on overall competition in the short term, they could motivate existing players to re-examine their business structures and strategies. Innovative products and services introduced by new digital entrants could inspire traditional insurers to accelerate their innovation efforts and increase insurance penetration in areas that historically have been underinsured.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=316843.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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