A new car insurance comparison and recommendation service (2.0) was launched on the 20th, raising expectations among small and medium-sized insurance companies. This is because if their affordable products stand out through the service, customer choices may change. Most customers tend to mechanically renew their existing products rather than comparing premiums when it is time to renew their car insurance. As a result, the four major non-life insurance companies (Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance) have held over 80% market share in the car insurance sector for a long time. Small and medium-sized insurance companies believe that the established monopoly system could change if the atmosphere of premium comparison spreads.
According to financial authorities on the 19th, Naver Pay and Toss will provide the 2.0 service starting at midnight on this day. Habit Factory will launch its service at the end of this month, while Kakao Pay will do so in the second half of this year. The remaining five fintech companies that provide the current service (1.0), launched in January last year, have determined that they are not generating revenue and have given up on the 2.0 service.
The biggest feature of the 2.0 service is the unification of insurance premiums. Currently, customers pay a 3% commission fee when subscribing to products through the 1.0 service. It is cheaper to sign up by visiting the insurance company's website, where there are no commission fees. As a result, more customers have been accessing the insurance company's website to sign contracts rather than signing up through the service. From January last year to February this year, the number of users of the service since the launch of the 1.0 service was about 1.486 million, but the number of contracts completed was only about 140,000.
In response to criticism that the service does not align with its intended purpose, financial authorities introduced the 2.0 service, lowering the commission rate to 1.5% and requiring insurance companies to bear the commission. The insurance premiums on the insurance company's website and those provided by the comparison and recommendation service have become the same. Financial authorities expect that more contracts will be signed using the service.
While the insurance and fintech industries have reached an agreement on commission rates, there are widespread complaints. In particular, large insurance companies argue that if they have to bear the commission directly, their profitability will decrease and ultimately lead to an increase in car insurance premiums. In contrast, fintech companies lament that the reduction of the commission to 1.5% does not yield significant revenue.
However, small and medium-sized insurance companies are expressing support for the 2.0 service. Many car insurance subscribers choose to join based on the 'brand' of large insurance companies. Although they renew every year, they often rejoin the same product instead of comparing prices among different companies.
Small and medium-sized insurance companies believe that if the 2.0 service activates and informs customers that their products are affordable, their market share will increase. In fact, as of the 1.0 service, the market share of small and medium-sized insurance companies was 41.4%, not significantly different from that of large insurance companies. Considering that the overall market share of small and medium-sized insurance companies has remained around 16-17% over the past three years, they see a glimmer of hope.
Small and medium-sized insurance companies also showed an active stance during the 1.0 service. While large insurance companies required customers to bear the commission, small and medium-sized insurers covered the fees themselves. They deemed it more important to expand market share, even at the expense of individual profitability. Since car insurance only becomes stable and profitable with a larger number of subscribers, it was an ideal opportunity for small and medium-sized insurance companies that find it difficult to advertise extensively to promote their products for free through the comparison and recommendation service.
However, no changes occurred as the 1.0 service failed to gain popularity. In the first half of last year, while the market share of non-face-to-face insurance companies such as AXA Insurance, Hana Insurance, and Carrot Insurance slightly increased, the market shares of other small and medium-sized companies declined.
Small and medium-sized insurance companies believe that for the 2.0 service to become active, financial authorities and other entities need to engage in proactive promotion. A representative from a small insurance company noted, "It would be great if a culture is created where customers compare car insurance premiums and choose affordable products," but added, "I’m not sure if real changes will take place because it seems like there hasn't been any substantial promotion."