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South Korea’s insurance industry is doing the math ahead of introducing an insurance comparison and recommendation service in January 2024. The industry says it has no choice but to charge higher premiums than products sold through insurers’ own cyber marketing (CM) channels, such as homepages, given the commissions paid to platform operators Naver Corp. and Kakao Corp., among others. Critics argue that the purpose of an innovative financial service could be eroded if the same insurance product comes with higher premiums under this structure, as it may lead customers using the comparison platform solely to compare insurance premiums and then visit each insurer’s homepage to get insured.
According to multiple industry sources on Sunday, insurance companies will set new rates that reflect platform brokerage fees in the price of products sold via the comparison and recommendation service channel. The rates will then be verified by the Korea Insurance Development Institute (KIDI) in December and reflected in the services of online platforms such as Naver, Kakao, and Toss Payments Co. The service was designated as an innovative financial service by the financial authorities in July 2023 and is set to be implemented on January 19, 2024.
Insurers are expected to raise premiums when considering brokerage fees. While there is no commission on products sold via insurers’ websites, the platform comparison and recommendation service will charge platform fees. The financial authorities suggested that the commission taken by platforms be within the 4 percent range of the premium for auto insurance policies and between 15 to 20 percent of face-to-face sales fees for savings and guaranteed insurance policies respectively.
According to KIDI, an average increase in the range of 30,000 won ($23.14) will be inevitable on the comparison and recommendation service if the maximum brokerage fee of 4.9 percent is reflected in the products. Some small and medium-sized insurers could apply the same premiums as those on existing CM channels to expand their market share, but a slight increase in premiums would be unavoidable as the platform fee must be spread across existing products.
By Yoo Joon-ho and Choi Jieun
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