Insurance Companies Now Allowed to Own Fintech Subsidiaries... But Zero Cases in 2 Years (Comprehensive)

Despite Allowing Financial Company Investments, Business Feasibility Not Verified
Insurance Companies 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 thousands of billions of won in fintech (finance + technology) firms with innovative technology."

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 inducing financial companies to invest in fintech firms that have ideas and technological capabilities but lack funds, but no results have come from 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 the equity limit for fintech companies with the approval of the Financial Services Commission.

The financial authorities focused on the fact that overseas financial companies have acquired various fintech firms.

Goldman Sachs jointly invested in the fintech company Context Relevant with Bank of America (BOA) and Merrill Lynch in 2014, and in 2015 invested in the social media company Dataminr. This company analyzes big data on social network services (SNS) to identify customer needs and provide important information and trends.

Soci?t? G?n?rale acquired Treezor, a BaaS platform company providing real-time banking systems, payments, and personalized card programs, in September last year and began developing an innovative payment platform. BBVA acquired the unstructured data analysis company Madiva in 2014 and then acquired the user experience (UX) and design company Spring Studio in April the following year.

However, no insurance company holding equity in fintech firms has yet emerged.

Although insurance companies are not directly entering 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 the fintech company ‘ToBeCon’ that allows verification and submission of health checkup histories from the National Health Insurance Service using only joint authentication procedures. It is promoting collaboration with fintech companies through Samsung Financial Open Collaboration with group financial affiliates.

Hanwha Life Insurance has operated the fintech incubation center ‘DreamPlus63’ since 2016, playing a role in facilitating cooperation between fintech startups and domestic and international companies. Kyobo Life Insurance applied fintech technology from the data specialist 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 plans.

Financial Services Commission Plans to Revise Regulations on Insurance Company Subsidiary Ownership

Although collaboration with fintech companies is important to promote digitalization in the insurance industry, they have not engaged in mergers and acquisitions (M&A) or investments. This is because market viability has not yet 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?" and added, "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. They envision promoting alliances between financial companies and digital finance through institutional improvements. While the insurance industry welcomes the creation 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, "In reality, it is not easy to invest in fintech ventures if business viability is not guaranteed."

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