"Big Tech's Entry into Insurance... Monopoly of Sales Channels Must Be Prevented"

KIRI 'Expectations and Challenges of Big Tech's Entry into the Insurance Industry'

[Asia Economy Reporter Oh Hyung-gil] As big tech companies based on platforms such as Naver and Kakao enter the insurance sector, there are calls to ensure that they do not monopolize the product sales channels.

On the 12th, Hwang In-chang, a research fellow at the Korea Insurance Research Institute, stated in the report titled "Expectations and Challenges of Big Tech's Entry into the Insurance Industry" that "While big tech's entry into the insurance market can enhance the digital competitiveness of the insurance industry, it also increases the possibility of market failure due to new types of risks."

The report viewed the reason big tech expands into the financial sector, which is less profitable compared to their core businesses, as an effort to increase their customer base and loyalty.

Overseas, companies like Apple, Amazon, Google, and Facebook provide payment and loan services, while Rakuten, Alibaba, and Tencent have also entered asset management and insurance sectors. Kakao is expected to enter the insurance market next year, starting with Kakao Bank and then Kakao Non-Life Insurance.

Research fellow Hwang pointed out that big tech's entry into insurance "can induce innovation in the insurance market by strengthening competition within the insurance industry through the development of various insurance products and services and efficiency improvements via inter-company competition, thereby increasing consumer welfare," but also noted that "there is a possibility of regulatory arbitrage due to the traditional financial regulatory framework, and exposure to new types of risks in terms of market competition, financial stability, and consumer protection."

[Image source=Reuters Yonhap News]

He also diagnosed that while this could pose risks to insurance companies such as customer churn or reduced market dominance, it could also present opportunities like business diversification and improved customer satisfaction through digital transformation.

Research fellow Hwang emphasized, "Policy authorities need to conduct various reviews from the perspectives of financial regulatory frameworks, market competition, financial stability, and consumer protection to prevent market failure caused by new types of risks," adding, "It is necessary to check whether regulatory arbitrage occurs when big tech provides insurance services and to discuss the mid- to long-term transition of the current sector-based, enumerative financial regulations to function-based, comprehensive regulations."

He further added, "It is necessary to create a market environment where no specific platform monopolizes the sales channels of insurance products, monitor insurance companies' risk-taking due to intensified competition, and strengthen protective measures for consumers using insurance products and services through platforms."

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