Car and Real-World Insurance May Be Compared and Recommended on Platform as Early as Year-End

Financial Services Commission Unveils Detailed Plans for Insurance Comparison and Recommendation Platforms
Including Auto and Actual Expense Insurance... Only CM Products Allowed
Protection Measures Such as Algorithm Verification... Violators Face 'Expulsion'

The 'insurance comparison and recommendation platform' is expected to be operational as early as the end of this year. The platform will also include automobile insurance and indemnity medical insurance, which had been points of sharp contention between the insurance and fintech industries.

On the 6th, the Financial Services Commission announced the 'Pilot Operation Plan for Platforms Handling Insurance Products' containing these details. Starting as early as the end of the year, consumers will be able to compare online insurance products from multiple insurance companies at a glance through the platform, receive recommendations for the most suitable products, and subscribe via the insurance companies' websites.

The products that the platform can handle include insurance closely related to daily life, such as indemnity insurance (with about 40 million subscribers) and automobile insurance (covering about 25 million vehicles), which most of the population subscribes to. Automobile insurance, a mandatory insurance, has a significant attraction effect for drawing customers, leading to strong opposition mainly from large insurers in the insurance industry. They feared that competition would intensify upon entering the platform, potentially causing them to lose market share. However, the authorities believe that promoting market competition will ultimately benefit consumers. Shin Jin-chang, Director of the Financial Industry Bureau at the Financial Services Commission, explained, "Currently, the top four insurance companies hold 85% of the market share, but with the launch of the platform, small and medium-sized companies will actively engage in sales, leading to natural competition."

Additionally, short-term insurance (such as travel and fire insurance) and savings-type insurance (excluding pensions), which are closely related to daily life, were permitted. Products with high potential for market activation, such as pet insurance and credit insurance, were also included. However, products with complex structures that raise concerns about incomplete sales and consumer harm, such as whole life insurance, health insurance, and variable insurance, were excluded.

Commission Rate Caps... Only CM Products Allowed

The critical issue of commission rates was also addressed by the authorities. For automobile insurance, insurers initially argued that a commission rate in the 2% range was appropriate, while the platform industry claimed that a rate in the 10% range was suitable. The Financial Services Commission stated, "To minimize the transfer of commissions charged by platforms to insurance companies onto premiums, a commission cap has been set," explaining, "For example, the commission cap relative to automobile insurance premiums is limited to the 4% range." Other limits include short-term insurance commissions capped at within 33% of face-to-face recruitment commissions, savings-type insurance at about 15%, and protection-type insurance at about 20%.

All products allowed on the comparison and recommendation platform are online sales (CM) products that can be subscribed to via websites or applications (apps). Face-to-face subscription products through agents or telephone subscription (TM) products are excluded. CM products are easier to compare and recommend online because they do not require additional procedures and have simpler product structures.

Protection Measures Including Algorithm Verification... 'Expulsion' if Violated

Various protection measures for consumers have also been established. First, the algorithms used for comparison and recommendation will be verified to ensure fair and transparent operation. It is mandatory for specialized institutions such as Koscom and the Financial Supervisory Service to conduct pre-verification of variables used and the appropriateness of ranking calculations, while consumers will be informed of key algorithm details to easily understand factors affecting the comparison and recommendation rankings.

Furthermore, a minimum level of business guarantee deposits has been set according to sales volume to ensure sufficient compensation in case of consumer damages. Insurance for liability coverage corresponding to the minimum limit will also be recognized as a business guarantee deposit.

Additionally, the authorities stated that if fabricated information is found to be used for other insurance sales during the comparison and recommendation process, the platform will be expelled from the business. A Financial Services Commission official explained, "These detailed provisions have been set as additional conditions for designation as an innovative financial service," adding, "If violated, the platform will fail re-designation after two years and will no longer be able to operate a comparison and recommendation platform business."

Operational as Early as Year-End... All Major Big Tech Companies Expected to Participate

This platform is expected to be operational as early as the end of this year. Since insurance solicitation activities are prohibited unless one is an insurance company employee, insurance agency, or insurance planner under the Insurance Business Act, platform companies require designation as innovative financial services from the Financial Services Commission. The Commission plans to accept applications this month and complete designations around June. After about six months of preparation, it is judged that the platform can launch as early as the end of the year. Currently, 17 businesses, including major big tech companies such as Naver Financial and Kakao Pay, as well as fintech companies, have expressed their intention to apply during the preliminary demand survey.

Initially, the insurance industry was not very welcoming of the launch of the insurance comparison and recommendation platform. They argued that consumers can already sufficiently compare and subscribe through the 'Insurance Damoa' website prepared by the General Insurance Association, and that entering fintech platforms would require paying commissions, which could be passed on to consumers. Insurance planners also initially opposed the platform, fearing threats to their survival. The fact that only CM channel products are allowed on this platform is also in line with this context.

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