Will South Korea's Mini Insurance Market Grow Rapidly Like Japan's? Insights from the Japanese Case

[Asia Economy Reporter Changhwan Lee] As financial authorities ease the 'one company, one license' regulation for insurance companies, expectations are growing for the revitalization of the small-amount short-term insurance (mini insurance) market. There is also a possibility that the related market will grow significantly, similar to advanced overseas countries such as Japan and the United States, where the 'one company, one license' regulation does not exist.

On the 21st, the Financial Services Commission announced that it will relax the one company, one license approval policy to promote the entry of specialized insurance companies suited to the digital era.

The financial authorities have regulated that only one life insurance company and one non-life insurance company can be within one insurance group to ensure fair competition. However, such policies do not exist in advanced overseas countries such as the United States, Japan, and Europe, leading to criticism that the regulation is excessive. The government explained that this decision was made as part of financial regulatory innovation.

With the deregulation, the small-amount short-term insurance market is expected to grow in South Korea as well. Small-amount short-term insurance refers to mini insurance with an insurance period of less than one year and an insurance payout limit of 50 million KRW.

The government and industry are paying attention to Japan’s case, which introduced the small-amount short-term insurance system far ahead of Korea.

Trends of Small-Amount Short-Term Insurance Companies in Japan (Source: Korea Insurance Research Institute)

According to the Korea Insurance Research Institute, Japan first introduced the small-amount short-term insurance system in 2006. In the first year of introduction, two operators were registered, and the number of operators steadily increased to 108 specialized small-amount short-term insurance companies as of September 2020. The number of small-amount short-term insurance contracts also continuously increased from about 3.68 million in 2009 to 9.14 million in the first half of 2020.

Most of Japan’s small-amount short-term insurance focused on non-life insurance products. Seventy-nine companies, accounting for 73.1% of the total, handled non-life insurance products. Among non-life insurance, 51 small-amount short-term insurance operators handled household property insurance (gajae insurance) that compensates for household property losses caused by fire, wind, and flood, making it the largest category.

Nineteen small-amount short-term insurance operators focused on cost and other insurance that compensates for expenses arising from earthquakes, distress, and other incidents. This is interpreted as closely related to Japan’s characteristics, where large disasters such as earthquakes, typhoons, and floods frequently occur. Additionally, there were 29 life insurance companies and 9 pet insurance companies.

In Korea, the number of insurance companies considering entry into the small-amount short-term insurance market has recently been increasing, and there is a high possibility that the market will grow like Japan. Digital insurance companies such as KakaoPay Non-Life Insurance and Shinhan EZ Non-Life Insurance are actively launching related products. Large insurance companies are also steadily releasing products targeting younger generations, so the emergence of specialized small-amount short-term insurance companies within a few years is highly likely.

Kim Kyung-sun, a research fellow at the Korea Insurance Research Institute, said, "I understand that several insurance companies are interested in small-amount short-term insurance and are exploring entry into the related market," adding, "Since the government has announced that it will ease regulations and grow the related market, the small-amount short-term insurance market is likely to grow in the long term."

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