Kakao’s travel insurance premium makes waves in Korea

2023.09.21 14:13:01 | 2023.09.21 15:11:00

[Courtesy of Kakao]이미지 확대

[Courtesy of Kakao]

Kakao Pay Insurance Corp.’s overseas travel insurance product is taking the local industry by storm. Within a mere month of its launch, the product garnered nearly 60,000 subscribers and has been showered with accolades from satisfied users.

The remarkable achievement can be attributed to its innovative “reverse-thinking” approach and the flexibility it offers policyholders to tailor their coverage to their specific needs.

According to industry sources on Wednesday, Kakao Pay Insurance’s overseas travel insurance had 53,814 policyholders as of the end of August. The figure skyrocketed, surpassing five times the initial 10,877 sign-ups during its first month of launch in June.

When considering the peak summer vacation season, which includes the period from July 10 to August 9, the number of policyholders reached 57,870.

In July, the country’s five major insurers - Samsung Fire & Marine, Hyundai Marine & Fire, DB Insurance, KB Insurance, and Meritz Fire & Marine, - had 128,649 new overseas travel insurance contracts.

“It is difficult to compare the number of new sign-ups and the number of insureds, but if you look at overseas travel insurance alone, Kakao Pay Insurance has risen to the second place in the industry,” said an industry insider.

If this trend continues through the upcoming Chuseok and winter holidays, Kakao is expected to catch up with Samsung Fire & Marine, the No. 1 travel insurance company in Korea by number of insureds.

The secret behind Kakao Pay Insurance’s overseas travel insurance success lies in its “reverse-thinking” strategy.

It first reversed the traditional insurance design process, allowing users to tailor their coverage according to the characteristics of their destination and their personal circumstances.

Unlike conventional insurance products with predefined mandatory coverage items, users have the flexibility to design their own protection.

For example, travelers can opt for insurance that covers delays of over two hours for flights or four hours for luggage, priced at just 390 won ($0.3).

For example, you can buy a policy for 390 won to cover a flight delay of 2 hours and a baggage delay of 4 hours or more. Optimized with personalized coverage, the average premium per person is 5,973 won, less than a third of the industry average of 17,000 won.

The strategy of offering higher discounts for multiple policyholders also played a significant role in its success. When two people sign up together, they receive a 5 percent discount, which increases to 10 percent for three people.

On average, Kakao Pay Insurance’s overseas travel insurance had 2.8 policyholders per contract.

“Individual travelers in their 20s and 30s typically had 2.2 to 2.3 policyholders, while younger individuals or those aged 60 and above often had 3.6 policyholders per contract,” said a company official. This is twice the industry average of 1.5 policyholders per contract.

Another attractive feature was the policy that returns 10 percent of the premium if travelers return from their trips without any incidents, which is a unique and unprecedented service in the Korean insurance industry.

Consumers have been responding positively to this, as it offers a chance to get some money back.

Kakao Pay Insurance has already returned a total of 65 million won ($49,000) to policyholders by the end of last month.

In terms of policyholders by age group, those in their 20s and 30s accounted for 49 percent and 40s 20 percent. By gender, females in their 20s and 30s were the highest at 29 percent.

Analyzing the insurance claims, damage to personal belongings (43.7 percent) was the most common, followed by flight delays (31.4 percent), diseases (17 percent), and injuries (6.7 percent), both overseas and domestically.

Currently, Korea’s travel insurance market has a low claims ratio, with losses typically ranging from 40 to 60 percent.

By Lim Young-sin and Minu Kim

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]