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South Korea’s tech giant Kakao and financial giant Shinhan are set to launch online- and mobile-only insurers by next month to attract millennial and Generation Z customers with affordable and simple products.
Kakao’s mobile payment arm, Kakao Pay, is slated to launch its first general insurance unit called Kakao Pay Insurance in July, adding competition to the online-only insurance market here currently dominated by three existing insurers – Kyobo Life Planet, Hana Insurance and Carrot Insurance.
After obtaining the license to operate an insurer from the policymaking Financial Services Commission in April, Kakao Pay plans to funnel 60 billion won ($46.8 million) in launching Kakao Pay Insurance, the payment firm said earlier. Kakao Pay’s parent firm Kakao seeks to finance an additional 40 billion won into the project.
Kakao Pay Insurance will focus on travel, mobile phone and pet insurance first, according to Kakao Pay. Onlookers expect the firm to expand its portfolio to medical and car insurance in the long term. It will allow customers to purchase insurance with simple and easy steps via Korea’s No.1 messenger service Kakao Talk and Kakao Pay platforms. Artificial intelligence and chatbots will be used to process claims.
The new insurer is projected to see fast growth driven by its connection with Kakao Talk and Kakao Pay’s monthly average users of 50 million and 38 million, respectively.
Shinhan Financial Group, a more traditional business seeking to enter the market, was also granted FSC approval on Thursday to add BNP Paribas Cardif General Insurance as its subsidiary. Shinhan seeks to turn the subsidiary -- which it acquired a 94.56 percent in from France’s BNP Paribas Group for 41 billion won in November last year – into an online-only insurer.
Despite mounting expectations, online-only insurers have been struggling to make profits compared with more traditional insurers. Carrot Insurance, for example, reported a net loss of 65 billion won last year, almost doubling its loss from the previous year, in which it posted a net loss of 38.1 billion won.
Online-only insurers refer to businesses that earn 90 percent of their premiums and sales via online, mobile, phone and mail. They have been attracting customers by offering short-term products with monthly rates of below 10,000 won.