Kakao Pay Insurance, which sold 'mini-insurance' that simplifies and cheaply covers travel, mobile phone, and golf insurances, has launched its first health insurance product that covers critical illnesses such as cancer, cerebrovascular diseases, and heart diseases. By throwing a challenge into the fiercely competitive long-term insurance market where all domestic insurers are competing, it is seeking to expand its territory. The success of its strategy utilizing platforms such as the Korean applications KakaoTalk and Kakao Pay is expected to be pivotal.
According to the insurance industry on the 18th, Kakao Insurance launched a health insurance product for adults on the 16th. This product is largely composed of diagnostic benefits for critical illnesses such as cancer, cerebrovascular diseases, and heart diseases, along with eight customized packages (riders). This is the first time Kakao Insurance is selling long-term life insurance since its establishment in October 2022. Long-term life insurance refers to products that provide coverage for diseases and accidents for more than one year.
This product is designed to be lighter compared to similar products sold by major insurers. For example, if a person is diagnosed with cancer, the diagnostic benefit ranges from 20 million to 50 million won, and the treatment cost (rider) is around 1 million to 5 million won. Compared to other products that provide 100 million to 200 million won for diagnostic benefits and pay 30 million won annually for treatment, it is bound to fall behind in competition.
However, a lower coverage limit means that the insurance premiums are cheaper. Instead of competing by claiming 'the best coverage in the industry' like major insurers, Kakao Insurance has strategized to target customers who feel burdened by existing products. It aims to provide options for the digital generation in their 20s to 40s who want minimal coverage without spending significant amounts on insurance. To this end, the age for enrollment has been limited to 19 to 49 years, with monthly premiums set at a minimum of 13,000 won and a maximum of 34,600 won for a 20-year-old female.
Kakao Insurance has primarily sold mini-insurance to date. Particularly, its overseas travel insurance surpassed 2 million subscribers within just 1 year and 4 months since its launch. However, since mini-insurance premiums are around 10,000 won, it has a significant possibility of incurring losses considering advertising costs. In fact, Kakao Insurance recorded a net loss of 48.2 billion won last year and has not yet turned a profit.
Analysis suggests that Kakao Insurance's focus on selling mini-insurance despite accumulating losses aims to secure loyal customers. By selling mini-insurance to the digitally savvy youth and middle-aged demographics, it provides the experience of 'signing up for insurance and claiming benefits through the Kakao app'. Kakao Insurance believes that the younger generation, accustomed to this utility, is more likely to choose its products when enrolling in long-term insurance.
Having secured potential customers over the past three years, Kakao Insurance is now entering a stage of selling long-term insurance and boosting profitability. Long-term insurance is a key product that raises the contract service margin (CSM), an indicator of future profitability under the new accounting standard (IFRS 17).
Kakao Insurance plans to sell health insurance exclusively through the Kakao Pay app. Customers can design products and complete contracts directly through the app without the help of insurance agents, making it a 'digital completion type' product. Kakao Insurance explained that it minimized complex insurance terms that are hard for general customers to understand and simplified the selection of riders as much as possible.
However, some in the insurance industry are not guaranteeing success. While many attempts have been made to sell insurance in a digital completion format like Kakao Insurance, no notable success stories have emerged. Domestic digital insurers and insurance technology (insurtech) companies are primarily adopting the 'omnichannel' strategy where agents provide advice and recommendations to subscribers, rather than focusing solely on the digital completion model.
Lacking the sales organization like major insurers, Kakao Insurance is expected to actively utilize its greatest weapon, the popular apps KakaoTalk and Kakao Pay. A Kakao Insurance representative noted, "We are considering various marketing activities linked with the platform."