[Column] Big Tech Expands into Insurance... Will Consumers Welcome It?

Popularization of Direct Car Insurance Without Fees
Services Increasing Consumer Burden Will Be Ignored
Must Keep in Mind the Insurance Industry as a 'Private Social Safety Net'

Oh Hyung-gil, Political Economy Department Reporter

[Asia Economy Reporter Oh Hyung-gil] Naver Financial's upcoming car insurance comparison service has encountered difficulties even before its launch due to the non-participation of non-life insurance companies. Kakao attempted to enter the online car insurance market in partnership with Samsung Fire & Marine Insurance but had to abruptly shift to a solo entry due to disagreements.

Major information technology (IT) companies, so-called big techs, are accelerating their entry into the financial industry. Starting with deposits, then loans, and now insurance, they have shown voracious appetite with seemingly no obstacles. The insurance industry seemed to be caught in a complex calculation on how to leverage their influence amid concerns that the inevitable had finally arrived.

However, the situation changed rapidly. An executive from an insurance company gave a harsh forecast, saying, "Big techs that do not properly understand the nature of insurance are bound to become slippery eels." The reason came down to the answer: "consumers."

First, Naver’s planned car insurance comparison service is consumer-friendly, based on its 40 million members. However, it is uncertain whether consumers will choose it.

The decisive reason KB Insurance, following DB Insurance, diverged from Naver is reportedly related to commissions (advertising fees). Naver explained that there was no agreement on this, but insurance companies expect that some form of service fee will have to be paid. Then, who will bear the cost?

Insurance companies operate direct car insurance without commissions. The share of direct sales has already exceeded half and is increasing every year. In other words, consumers are already accustomed to commission-free insurance.

The structure makes Naver-affiliated insurance inevitably more expensive than direct insurance. If prices are lowered, the cost must be passed on somewhere. If a "cutting one's own flesh" competition occurs by reducing services, it will ultimately harm consumers.

Kakao, preparing to enter the online car insurance business, cannot guarantee success unless it focuses on "consumer protection." Car insurance is a mandatory insurance with a policy nature, protecting not only drivers but also victims.

Not only affordable premiums but also nationwide dispatch service networks, collaboration with car centers and repair shops, and know-how in reasonable and objective compensation services are essential infrastructure.

Korean drivers contact insurance companies first when a traffic accident occurs or their vehicle breaks down, so domestic non-life insurers have built a solid service network. Such services are hard to find anywhere else in the world. However, whether Kakao can build such service infrastructure alone in a short period remains questionable.

If issues directly related to consumer protection are not resolved, it will bring greater trouble. Big tech companies must first recognize insurance not simply as a financial product but as a "private social safety net."

This content was produced with the assistance of AI translation services.