**Launch of New Car Insurance Comparison and Recommendation Service on the 20th**
Revised Commission System to Unify Insurance Premiums
Opportunity for Small and Medium Insurance Companies to Increase Market Share
“Need for Activation through Large-scale Promotion”
The new car insurance comparison and recommendation service (version 2.0) is set to launch on the 20th, raising expectations among small and medium-sized insurance companies. By highlighting their affordable products through the service, consumer choices may change. Most customers tend to mechanically renew their existing car insurance policies without comparing premiums as the renewal period approaches. As a result, four major non-life insurance companies (Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance) have accounted for over 80% of the car insurance market share for a long time. Small and medium-sized insurers see the potential for change in the established monopoly if the trend of comparing insurance premiums spreads.
According to financial authorities on the 19th, Naver Pay and Toss will begin offering the 2.0 service from midnight. Habit Factory plans to launch the service at the end of this month, and Kakao Pay will follow in the second half of this year. Five other fintech companies that launched their current services (version 1.0) in January last year have decided not to pursue the 2.0 service, citing insufficient profitability.
The most notable feature of the 2.0 service is the unification of insurance premiums. Currently, under the 1.0 service, customers bear a 3% commission when enrolling in a product. It is cheaper to visit and enroll via the insurance company’s own website, where no commission applies. Consequently, customers have increasingly opted to contract directly through insurance company websites rather than using the service. From January last year to February this year, the number of service users reached approximately 1.486 million, yet only about 140,000 contracts were finalized.
In response to criticism that this situation did not align with the service’s purpose, financial authorities introduced the 2.0 service, reducing the commission rate to 1.5% and making insurers responsible for the commissions. As a result, the insurance premiums offered through the comparison and recommendation service now match those of the insurance company websites. Authorities expect that the number of contracts concluded through the service will increase.
Despite agreeing on commission rates, both the insurance and fintech sectors have expressed dissatisfaction. Large insurers, in particular, argue that if they directly bear the commission, it will reduce profitability and ultimately lead to an increase in car insurance premiums. On the other hand, fintech companies lament that despite the reduced 1.5% commission, their profit margins remain small.
However, small and medium-sized insurers are supportive of the 2.0 service. Many car insurance policyholders join thinking of large insurers as a ‘brand.’ Although policies are re-enrolled annually, most customers renew without comparing prices between insurers.
Small and medium-sized insurers believe that if the 2.0 service is activated and their affordable products become known, their market share will increase. In fact, during the 1.0 service, the market share of smaller insurers reached 41.4%, not vastly different from large insurers. Considering that the overall market share of small and medium-sized insurers has remained between 16-17% over the past three years, there is a glimmer of hope.
Even during the 1.0 service, smaller insurers were proactive. While major insurers transferred the commission responsibility to customers, smaller insurers paid it directly themselves, prioritizing expanding market share over profitability per customer. Car insurance becomes profitable as the customer base grows, stabilizing the loss ratio. For smaller insurers, the comparison and recommendation service was a prime opportunity for free product promotion, as large-scale advertising to attract more customers is challenging for them.
However, with the 1.0 service failing to gain momentum, the landscape did not change significantly. During the first half of last year, some digital insurers like Axa, Hana, and Carrot Insurance saw a slight increase in market share, but other small to medium-sized insurers experienced a decline.
Small and medium-sized insurers believe that for the 2.0 service to gain traction, active promotion from the financial authorities is necessary. A representative from a smaller insurer stated, “Even if the atmosphere where customers compare car insurance premiums and opt for cheaper products is established, it would be beneficial for smaller insurers,” adding, “It remains to be seen whether significant changes will occur, as it seems there is no substantial promotion taking place.”