Insurance Companies Now Allowed to Own Fintech Subsidiaries... But '0 Cases in 2 Years'

Despite Allowing Financial Company Investments
Business Feasibility Not Verified
Reluctant to Invest in M&A and Others

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] "We aim to foster cases domestically similar to overseas financial companies investing billions of won in fintech (finance + technology) firms with innovative technologies."

Although domestic financial companies have been allowed to invest in fintech for two years, it has been revealed that insurance companies do not own any fintech subsidiaries. The authorities' ambitious plan was to invigorate the fintech industry by encouraging financial companies to invest in fintech firms that have ideas and technological capabilities but lack funds. However, no results have emerged in the insurance industry. The market atmosphere is that even innovative fintech companies find it difficult to secure investments if they cannot establish business viability.

According to the insurance industry on the 4th, the Enforcement Decree of the Insurance Business Act, which allows insurance companies to own fintech companies as subsidiaries, was implemented in July 2019. The regulation that limited non-financial companies' equity holdings to 15% under the Insurance Business Act was improved, and a basis was established to allow exceeding this limit for fintech companies with the approval of the Financial Services Commission.

However, no insurance company holding equity in fintech firms has yet appeared. While insurance companies have not directly entered the market, they are not uninterested. Many insurance companies have maintained close relationships ranging from fostering fintech companies to collaboration.

Samsung Life Insurance launched a non-face-to-face digital diagnosis service last month in collaboration with fintech company ‘ToBeCon,’ enabling verification and submission of health checkup records from the National Health Insurance Service using only joint authentication procedures. It is promoting collaboration with fintech companies through Samsung Financial Group’s Open Collaboration with its financial affiliates.

Hanwha Life Insurance has operated ‘DreamPlus63,’ a fintech incubation center, since 2016, playing a role in facilitating cooperation between fintech startups and domestic and international companies. Kyobo Life Insurance applied fintech technology from data-specialized company ‘Kukon’ to its smart withdrawal service for insurance policy loans. This service supports users withdrawing cash from ATMs without physical cards or passbooks.

DB Insurance has been operating an insurtech startup incubation program with the Korea Internet & Security Agency (KISA) since 2019, and Hyundai Marine & Fire Insurance signed a business agreement with Seoul Fintech Lab to support fintech startups and explore cooperation methods.

Financial Services Commission Plans to Revise Regulations on Insurance Companies’ Subsidiary Ownership

Collaboration with fintech companies is important to promote digitalization in the insurance business, but mergers and acquisitions (M&A) or investments have not been actively pursued yet. This is because market viability has not been verified.

An insurance industry official said, "Even if sufficient business viability is guaranteed, acquiring subsidiaries is still difficult, so who would decide to invest in fintech companies?" He pointed out, "We are active in fostering and collaborating with startups, but investing at the company level is a different matter."

The Financial Services Commission plans to revise subsidiary ownership regulations by June to expand investment and fostering in new industries such as platforms, MyData, and healthcare by insurance companies. The big picture is to promote alliances between financial companies and digital finance through institutional improvements. While the insurance industry welcomes the emergence of investment opportunities, there are already concerns about whether these will lead to actual investments.

An insurance company official said, "Digital enhancement through collaboration with fintech is essential for survival in a rapidly changing market environment," but added, "It is difficult to invest in fintech ventures riskily if business viability is not guaranteed."

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