Some analysis of the South Korean insurance sector by GlobalData;
The South Korean insurance industry is set to witness digital disruption as the implementation of the regulatory authority’s proposal to deregulate digital innovations will increase competition between neo-insurers and incumbents resulting in the rollout of innovative products, says GlobalData, a leading data and analytics company.
According to GlobalData, the South Korean insurance industry is expected to grow at a compound annual growth rate (CAGR) of 4.7% from KRW225 trillion ($199.4 billion) in 2023 to KRW270.4 trillion ($239.6 billion) in 2027 in terms of gross written premiums (GWP).
Sravani Ampabathina, Insurance Analyst at GlobalData, comments: “The South Korean insurance industry is dominated by incumbent insurers. Until 2018, the Financial Services Commission (FSC) had permitted only incumbent insurers to establish online platforms. This restricted new digital insurers to expand their presence in the country.”
While the FSC permitted the establishment of the country’s first neo-insurer, Carrot Insurance in 2019, the entry of new digital insurers over the last few years has remained minimal due to stringent regulations.
In November 2022, the FSC proposed to relax regulations for insurers that are introducing new online insurance products. Like a sandbox-approach, insurers would be given the flexibility to develop tech-related innovations in existing and new product lines.
Ampabathina adds: “The move will further make it easy for insurtech companies to launch specialized and disruptive products.”
In terms of the number of digital insurers, the general insurance segment is ahead of life insurance in South Korea. For instance, Carrot Insurance disrupted the motor insurance line with its per-mile usage-based (UBI) auto insurance program. Such disruptions are lagging in life insurance due to the restrictive rules that mandated face-to-face distribution for most life policies.
Ampabathina concludes: “The scenario is expected to change in the coming years with the FSC planning to deregulate online sales of life insurance. In addition to the entry of neo-insurers into life insurance, existing life insurers are also expected to develop their own online platforms. For example, in January 2023, KB Life Insurance and Shinhan Life established their individual digital strategy teams to develop new business models. Online sales of insurance in South Korea are expected to see a huge boost as the proposed regulatory changes will attract such online focussed neo-insurers.”
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