Kakao Pay Insurance, a digital non-life insurer, moved into the fiercely competitive health insurance market, a battleground for the industry, three years after its launch, but it is being assessed as having fallen short of expectations.
Kakao Pay Insurance posted a net loss of 35.2 billion won in January–September this year, widening from 34.9 billion won a year earlier. During the period, insurance revenue increased from 24.6 billion won to 39 billion won, but insurance service expense rose from 53.1 billion won to 65 billion won. Cumulative deficits grew from 131.5 billion won at the end of March to 153 billion won at the end of September.
Kakao Pay Insurance entered the long-term insurance market by launching health insurance for infants, toddlers and elementary and middle school students last year and a separate product for adults in June. The product's sales (written premiums) came to 2.924 billion won in January–September this year. The insurance contract margin, derived from sales and directly tied to net profit, was 900 million won, of which only 150 million won was recognized as third-quarter revenue.
Kakao Pay Insurance focused on mini policies such as travel, golf and mobile phone insurance, with premiums of 10,000–20,000 won. The strategy was to sell low-burden mini policies via KakaoTalk to acquire customers, then sell them health insurance. Mini policies have limited profitability when advertising costs are considered, but health insurance is more profitable because the premium per policy is higher and the term longer.
Kakao Pay Insurance's health insurance failed to gain traction, apparently because it could not overcome the limits of non-face-to-face enrollment. Many pointed out that health insurance products are complex, making it difficult to enroll alone via an app without help from an insurance planner.
Carrot General Insurance, a digital insurer, also started with auto insurance and sought to expand its portfolio to health coverage for office workers, but it was absorbed and merged into HANWHA GENERAL INSURANCE after failing to absorb the losses. Another digital insurer, Kyobo Lifeplanet, sold only non-face-to-face products but shifted last year to a strategy of deploying consultants in the sales process. Kyobo Lifeplanet has never posted a profit since its launch in 2013.
A Kakao Pay Insurance official said, "We judged this is the right time for sustainable growth and for protection that spans the entire customer life cycle, so we are gradually increasing our long-term insurance products," adding, "We will continue to roll out offerings tailored to customer demand, centered on the three pillars of digital, leisure and life."