"Insurance Companies Accelerate Digital Transformation... Authorities Must Boldly Improve Insurance Regulations"

[Asia Economy Reporter Oh Hyung-gil] It has been pointed out that the digital transformation of insurance companies may deepen the 'fragmentation' of the insurance value chain, negatively affecting the establishment of long-term business models. Insurance companies are advised to prepare so that technology and data are not dependent on external companies.

On the 14th, Kim Gyudong, a research fellow at the Korea Insurance Research Institute, stated in the report "Current Status and Challenges of Digital Transformation in the Insurance Industry," "Due to digital transformation, insurance companies may increase their dependence on external technology and data, so it is necessary to establish strategies to secure independent technology through in-house technology development and expanded investment in startups."

Recently, the number of insurance companies reorganizing and expanding their digital organizations has been increasing, and digital transformation investments are expected to continue to grow in the future.

Samsung Life Insurance expanded its Digital Sales Department into the Digital Business Department and established a Data Strategy Team. Kyobo Life Insurance expanded its Digital Innovation Support Office into the DT (Digital Transformation) Support Office and established departments related to platforms, big data, artificial intelligence (AI), and MyData.

The report pointed out that this expansion of digital transformation leads to increased external dependence on technology and data, and the fragmentation of the insurance value chain may cause difficulties in establishing consistent long-term management strategies for insurance companies.

As external technology companies' technological superiority and platform economies grow, insurance companies are increasingly likely to depend on external technology and provide insurance products and services combined with external platforms, which can deepen the fragmentation of the insurance value chain, the report elaborated.

For example, in the case of the safe driving discount special contract for automobile insurance, the external company operating the system only provides the insurer with the driver's safe driving score and does not share driving habit data. This can lead to long-term technology and data dependency and become an obstacle to long-term strategy establishment.

Furthermore, the report suggested that financial authorities should boldly improve insurance regulations suitable for traditional insurance products and sales channels and establish new regulations appropriate for the digital era.

The report stated, "The same standards are applied to insurance products with small insurance amounts and simple coverage, which hinders the sale of simple insurance products through mobile channels," and "the current sales channel system, which is only divided into face-to-face, telemarketing (TM), and cybermarketing (CM), fails to meet the complex and diverse preferences of insurance consumers regarding recruitment channels and contract processes, necessitating the introduction of an omni sales channel that combines face-to-face and non-face-to-face methods."

It added, "The use of AI and robo-advisors in the insurance sales process is not easily attempted by insurance companies due to insufficient legal grounds, so institutional improvements are required to allow rapid introduction under the post-responsibility of insurance companies," and "in preparation for the future expansion of AI application, a supervisory system for AI algorithms needs to be established."

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