Major digital non-life insurers saw rising net losses and a simultaneous decline in solvency ratio (K-ICS), suggesting that their business structures—where selling long-term protection products is difficult—are widening deficits and weakening soundness indicators.
According to each company's semiannual reports on the 2nd, all five digital non-life insurers recorded net losses in the first half of this year. Kyobo Lifeplanet's net loss was 7.9 billion won, down 13.2% from the same period last year. Over the same period, Shinhan EZ Insurance's net loss surged to 15.7 billion won, an increase of 161.7%, and Kakao Pay Insurance's net loss rose to 24.8 billion won, up 13.8%. Hana Insurance also posted a net loss of 19.4 billion won, an increase of 10.2%. By contrast, Carrot General Insurance was the only one to improve, with a net loss of 24.5 billion won, down 20.7%. The combined net losses of the five companies totaled 92.3 billion won, up 10% from 83.9 billion won in the same period last year.
All five companies' K-ICS ratios fell. The K-ICS ratio is a measure designed to assess whether insurers can properly pay claims when accidents occur. In the second quarter of this year, Kakao Pay Insurance's K-ICS ratio was 213.5%, about one-fifth of 1,171.9% in the same period last year. Carrot General Insurance's K-ICS ratio plunged by 139 percentage points to 67.1%. Kyobo Lifeplanet's was 214.9%, down 25 percentage points; Shinhan EZ Insurance's was 309.5%, down 34 percentage points. Hana Insurance also recorded 141.3%, a drop of 19 percentage points.
However, Kakao Pay Insurance said that as it enters its third year of operation and product sales have become full-scale, the excessively high K-ICS ratio has normalized. Carrot General Insurance explained that while regulatory support for newly established insurers had deferred the calculation of insurance risk amounts, the measure ended in the first quarter of this year, causing the ratio to fall, and there are no financial problems.
Digital non-life insurers rely on phone, mail and online channels for more than 90% of their distribution. Under the Insurance Business Act, face-to-face sales are often restricted, so there are limits to selling complex long-term protection products. Until now they have mainly sold short-term, low-value products such as travel insurance. But these products have premiums of only 1,000 won to 10,000 won, making them low in profitability. Recently digital insurers have also launched long-term products such as driver insurance, but since the market is already dominated by established large insurers, they have not achieved significant revenue improvement.
An industry official said, "Recent sluggish market conditions have worsened digital insurers' profitability, and because they do not have the same abundant capital-raising conditions as large firms, they are struggling to manage K-ICS ratios."