The financial authorities are poised to launch a new automobile insurance comparison and recommendation service (2.0). If a contract is finalized, the commission rate that must be paid to the fintech company providing the service will decrease from the current 3% to 1.5%, and the commission will be borne by the insurance company rather than the customer. Now, customers will be able to use the service to sign up for the cheapest automobile insurance.
However, the insurance companies that have to pay the commission directly are expressing dissatisfaction, saying that their actual revenue has decreased. In contrast, the fintech companies complain that the lower commission rate makes it difficult to recover their operational and maintenance costs. Some small and medium-sized fintech companies have declared that they will not participate in the 2.0 service. There are concerns that this is a failed improvement plan that does not satisfy all service providers.
According to sources in the insurance and fintech industries on the 3rd, some small and medium-sized fintech companies currently providing automobile insurance comparison and recommendation services have decided not to launch the 2.0 service. This is due to the decreased commissions and the expectation of losses as there are fewer customers utilizing the service. From January 19 to August 8 last year, there were only about 62,000 contracts through comparison and recommendation services, and this figure also includes other contracts such as overseas travel insurance, pet insurance, and savings insurance.
Fintech companies provide comparison and recommendation services through their respective platforms and receive commissions upon successful contracts. The more users utilizing the platform, the greater the possibility of contract finalization. The number of monthly active users (MAU) is structurally linked to the outcomes.
Small and medium-sized fintech companies with low MAU must differentiate themselves by providing more benefits or customer-tailored services to attract clients. However, the comparison and recommendation service is offered in the same manner across all platforms. Customers have no reason to deliberately access the small and medium-sized fintech firms' platforms to sign up for automobile insurance.
A representative from a small or medium-sized fintech company noted, "After launching and operating the comparison and recommendation service, we realized it does not generate profit. Since the service is based on MAU, we lack differentiation from so-called ‘Nekato,’ making it hard to win in competition."
For big tech firms, the situation is no different. Even with overwhelming MAU, it is challenging to expect significant revenue due to the lowered commission rates. When it comes to automobile insurance comparison and recommendation, it is known that Naver Pay has an overwhelmingly high MAU. Should the service become active, Naver Pay is expected to reap the most benefits. A representative from a fintech firm stated, "While it's not accurate to say there is absolutely nothing left, it is not at a level to expect any revenue." Another representative remarked, "We comply with the financial authorities' guidance," adding, "We are approaching this with the intent of providing a convenient service for customers."
Insurance companies that have to bear the commission directly will inevitably incur losses. The insurance industry argues that sharing revenue because fintech companies are entering the automobile insurance market to provide services is unfair, especially since it is challenging to generate substantial revenue in this market.
Automobile insurance is a mandatory subscription that drivers must have. Even if a comparison and recommendation service is launched to grab attention, it does not lead to new customers or an increase in subscription rates. Moreover, automobile insurance premiums are included in the consumer price index, and it is known that the financial authorities and insurance companies discuss whether to raise or lower the rates informally and implicitly. It is not a product that can significantly raise premiums to generate revenue merely because loss ratios have soared.
Ultimately, it is expected that insurance companies will provide various discounts to ensure that customers can subscribe to insurance through their own websites, even if a new comparison and recommendation service is launched. This could lead to actions contrasting with the financial authorities' drive to activate the service. An insurance industry representative said, "We have worked hard to grow our cyber marketing (CM) channels, so it's hard to understand the call to open the market under the banner of innovative finance now," adding, "It seems we can only think of the financial authorities benefiting the large platforms."