Kakao Pay Insurance Grows While Other Korean Digital Insurers Retreat

Korea's first wave of standalone digital insurers is retreating, with two early players returning to their traditional insurance parents after years of losses.

Yet Kakao Pay Insurance is moving in the opposite direction, posting rapid growth while narrowing its losses and expanding its product portfolio.

Their paths into digital insurance, however, were markedly different.

Kyobo Lifeplanet, Korea's first online life insurer, is set to be absorbed by parent Kyobo Life in April 2027, while Carrot General Insurance was absorbed by Hanwha General Insurance last year. Both emerged from insurance industry-led efforts to build separate digital insurance businesses.

Kakao Pay Insurance came from the other direction, launched in 2022 by an existing digital financial platform with a large user base.

Unlike banking or securities apps, which customers may use frequently, insurers have fewer reasons to draw users back on a daily basis. For standalone digital insurers, that means continuously spending to bring customers onto their platforms.

"Digital insurance is a very difficult area in which to generate meaningful business impact," an insurance industry official said. "It is not easy to secure either sales or profitability through digital channels alone."

The official added that, outside relatively straightforward products such as auto and travel insurance, consumers still face difficulty identifying their own needs and choosing long-term insurance products without assistance.

Kakao Pay Insurance entered the market with that traffic already in place. It operates without a separate insurance app, offering its services through KakaoTalk and Kakao Pay. Around 7 million users access Kakao Pay on an average day, according to the company.

"We started from a different point," a Kakao Pay official told The Korea Herald. "We are a case of a platform starting an insurance business."

The company had not initially planned to become an insurer.

Kakao Pay first considered operating an online general agency, but found that many existing insurance products were designed around face-to-face sales by insurance agents, making them difficult to sell directly online.

Rather than simply distribute existing products digitally, Kakao Pay decided to make its own, establishing Kakao Pay Insurance in 2022 to develop products designed for consumers to understand and purchase online.

Travel insurance became the first major test of the model. The product has surpassed 7 million cumulative enrollments, while the company has since expanded into mobile phone, infant, school-age child, health and pet insurance.

Its products are designed to be relatively simple and intuitive, allowing customers to purchase them without an agent. Kakao Pay Insurance has no insurance agents, eliminating traditional agent commissions.

The expansion has coincided with improving financial results.

Kakao Pay Insurance posted 25.6 billion won ($18.9 million) in gross written premiums in the second quarter, more than double the 12.5 billion won recorded a year earlier. First-half insurance revenue jumped 82.6 percent on-year to a record 44 billion won.

Its first-half net loss narrowed to 17.5 billion won from 24.8 billion won a year earlier. Long-term insurance premiums reached 4.5 billion won in the first half alone, already exceeding the 4.4 billion won recorded for all of last year.

The company attributed the improving bottom line partly to the completion of heavy initial investment in systems and infrastructure, with personnel, marketing and other operating costs entering a more stable phase.

Still, Kakao Pay Insurance has yet to turn a profit.

Kakao Pay Chief Operating Officer Han Soon-wook said during the company's second-quarter earnings call that improving loss ratios, the approaching end of depreciation related to initial investment and tight expense management should soon allow the company to give a clearer estimate of when it can break even.

"We expect to be able to provide a more concrete estimate of the break-even point in the not-too-distant future," Han said.

While the company is expanding its long-term offerings, short-term insurance can also become viable once it reaches sufficient scale, the Kakao Pay official said, pointing to the company's travel insurance as an example.

"We don't plan to expand long-term insurance just for profitability," the official said. "We will continue to broaden our product portfolio based on what users need, regardless of whether they are short- or long-term products."

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