Korea to allow platforms to provide insurance policy comparison services

[Courtesy of each company]

South Korean consumers will be able to use platform services, such as Kakao Corp. and Naver Corp., to compare various insurance policies offered by different companies as early as in December to help small- and medium-sized insurers to better compete against their bigger rivals.

Korea’s financial authorities plan to initially allow platform service providers to run pilot operations on insurance policies, such as for cars and indemnity health plans, that are relatively easier to sign up through the Internet or mobile phones, according to plans announced by the Financial Services Commission Thursday.

The FSC plans to receive applications from companies that want to operate an insurance comparison platform within this month and announce the results in June, of which 17 companies are said to have shown interest in a preliminary survey. If the plans go as planned, consumers are expected to be able to use these services as early as at the end of this year or early next year.

“We tried hard to include products that are relatively uncomplicated and less prone to incomplete sales but that are used by the majority of the people as much as possible.” Shin Jin-chang, director of the financial industry at the FSC. This measure is expected to have a significant ripple effect on the market as it will make it possible to compare indemnity health insurance that have 40 million subscribers and auto insurance 25 million subscribers.

An insurance comparison platform is a service that allows users to compare various insurance policies offered by different insurers and receive recommendations if they agree to provide their personal information. When users select certain insurance information they are interested in, they are directed to the corresponding insurance company’s online website so that they can sign up.

[Image source: Gettyimagesbank]

Currently, it is practically impossible for users to compare insurance premiums for similar products. Things have changed, however, as the FSC decided through its innovative financial service policies to allow big tech and fintech companies without insurance licenses to engage in a platform business to offer comparison and recommendation services and provide a linkage to insurance companies.

“Big tech companies are trying to enter new areas through comparison services and this will also help enhance consumer benefits,” said an official from the big tech industry.

The FSC announced a plan to launch insurance comparison platform services in August last year, but the plan was delayed as some issues in the insurance and platform industries had to be resolved.

The range of insurance policies that can be handled by the comparison and recommendation service platforms will be limited to short-term policies, including travel insurance plans, auto insurance, indemnity health insurance and savings plans. In addition, those gaining traction for further market expansion, such as pet insurance and credit life insurance plans, will be included.

The type of insurance policies permitted for platform businesses will be limited to only those available through cyber-marketing channels, given that products sold through face-to-face or telemarketing solicitation methods have a complicated structure, making it difficult to offer insurance policy comparison and recommendation services.

A plan to control platform operators was also announced so that they cannot abuse their position. First of all, a specialized institution such as Koscom will verify the appropriateness of their algorithms in advance to ensure fairness and transparency in their insurance comparison and recommendation platforms.

Furthermore, platform operators will also be prevented from making undue demands to insurance companies using their status. The measure includes an upper limit for short-term insurance to be capped at less than 33 percent of the commissions provided to companies engaged in face-to-face solicitation activities.