Kakao Sonbo Leading with Easy Claims and Innovative Platform, Threatening Traditional Insurers

Introduction of Kakao Sonbo Insurance Claim Simplification System Raises Loss Ratios of Existing Insurers
Retention Rates Worsen Due to Contract Cancellations... Market Share Redistribution Expected in Mid to Long Term

[Asia Economy Reporter Oh Hyung-gil] An analysis has emerged that if Kakao Insurance grows centered on its platform and simple claims service, it could pose a significant long-term threat to existing traditional non-life insurance companies.

However, it is considered unreasonable to expect that the business areas of existing insurers will drastically shrink due to Kakao Insurance. Rather, the launch of digital insurers is expected to revitalize the previously neglected general insurance market and promote the advancement of traditional insurers' systems through the introduction of innovative services.

On the 13th, researcher Lim Hee-yeon of Shinhan Financial Investment stated, "Kakao Insurance will grow centered on platform services and a simple claims system," and predicted, "It will operate an insurance platform business that provides services such as selling other companies' insurance products, contract management, and simple claims, receiving some commissions, while also selling its own insurance products."

The most direct impact on existing insurers from Kakao Insurance's entry was identified as an increase in insurance claims and deterioration in retention rates.

Researcher Lim said, "With the launch of Kakao Insurance's simple claims system, it is inevitable that the loss ratio will rise due to an increase in actual expense claims at traditional insurers," adding, "The increase in claims will stem more from existing policyholders than new subscribers." The only way to manage the actual expense loss ratio is the passage of a bill to simplify actual expense claims.

Kakao Insurance Threatens Existing Insurers with Simplified Claims

The actual expense insurance claim simplification bill allows consumers to receive necessary treatment at hospitals, after which the hospital sends related documents to the Health Insurance Review & Assessment Service (HIRA), which then forwards them to the insurer. Kakao Insurance's simple claims service, which partners with hospitals to obtain and send various documents required for claims on behalf of insurers, is analyzed by researcher Lim as the core of innovation and growth.

He said, "Given Kakao Pay's platform characteristics with 37 million subscribers, it is highly likely that forming networks with hospitals will be easier than for other companies," adding, "Improving claim convenience is a factor that clearly differentiates Kakao Insurance from traditional insurers, and this can also attract new subscribers."

He predicted that Kakao Insurance's claim convenience could cause some customer churn and deterioration in retention rates. He judged that the 13th and 25th retention rate data announced by insurers are not meaningful for comparison because the calculation standards differ by company. According to retention rates calculated by Shinhan Financial Investment for the first quarter of this year: Samsung Fire & Marine Insurance 97.9%, DB Insurance 99.8%, Hyundai Marine & Fire Insurance 99.8%, Meritz Fire & Marine Insurance 100.7%, and Hanwha General Insurance 97.3%. Researcher Lim explained, "To exceed 100%, retention rates must be high, cancellations low, or premium increases applied quickly," adding, "Given the current challenging environment for premium hikes, improving retention and reducing cancellations is the most realistic approach."

He also predicted that Kakao Insurance will penetrate the market with its own insurance products focusing on small mini-insurance and general insurance, and in the mid-to-long term, expand product types to include automobile insurance and long-term insurance.

Meanwhile, the Financial Services Commission granted preliminary approval for Kakao Insurance's insurance business in June. Kakao Insurance's capital is 100 billion KRW, with investors being Kakao Pay (60%) and Kakao (40%). Kakao Pay, the parent company of Kakao Insurance, is scheduled to list on the KOSPI market next month after a general public subscription for its IPO on the 4th and 5th of next month.

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