Insurers in dilemma over Naver’s expansion into finance
Major insurers are in a dilemma over emerging threats from Naver, as the nation’s dominant internet portal operator is seeking to make rapid inroads into the lucrative finance industry by taking advantage of its massive user base.
Naver has recently contacted the so-called big four non-life insurers here — Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance and KB Insurance — for partnerships before the internet firm launches an online rate comparison site for car insurance.
Naver is reported to have demanded the insurers pay around 11 percent of car insurance premiums paid by subscribers referred to them by the portal operator as an advertising cost.
Despite the high commission, they are in a growing dilemma over whether to accept Naver’s proposal due to the firm’s dominant online influence in Korea.
Samsung Fire, the largest non-life insurer here, has rejected the offer, considering its leadership particularly in the online car insurance market.
The company also said it did not want to shift its commission burden to subscribers by signing the partnership with Naver.
DB Insurance and KB Insurance are also in internal talks over whether to take part in the project.
As the site has not yet been launched, they are taking a waitand-see approach before signing partnerships with Naver.
The high commission rate has caused the firms to hesitate.
Amid mounting media reports criticizing Naver’s “excessive demand,” Naver Financial, the financial service arm of the company, took a step backward, denying that it demanded the 11 percent commission fee in exchange for the partnership on the rate comparison site.
The company also said it did not have any specific timeline for the launch of the service.
Despite its denial, industry watchers believe Naver’s inroads into the insurance industry are looming closer, after Naver Financial established an insurance subsidiary called NF Insurance Service last month.
Officials in the non-life insurance industry remained negative over Naver’s expansion into the insurance sector, as the company is taking advantage of “legal blind spots” to diversify its revenues in new areas.
“If Naver or its financial subsidiaries are trying to tap into the insurance industry on an equal footing as other traditional insurers, no one can blame the portal giant,” an industry source said.
“But this is not the case because Naver is using partnerships with existing players, rather than seeking to receive licenses, in an apparent move to evade regulations and reap more profits by using its massive influence on the internet.”
Naver is often compared with Kakao, the nation’s leading mobile messenger app operator, in that it has expanded its business on the back of the firm’s tens of millions of users here.
Starting this year, both firms are speeding up their drive into the financial sector, as they believe they can draw more users from existing financial firms by using their easyto-use online platforms.
But Kakao is relatively free from such a controversy, as the company is expanding its financial foothold after obtaining licenses just like existing financial players, according to the official.
“Kakao’s major financial subsidiaries — such as Kakao Bank and KakaoPay Securities — operate with licenses and are competing with other conventional players on an equal footing, which is one big difference between Kakao and Naver,” the official said.
“It is not fair for Naver to operate any financial businesses without relevant licenses,” the source said.
“By simply providing platforms, the company can evade a series of tough financial regulations. Under the current business structure, Naver will bear little responsibility for any potential mis-selling of financial products, and only those who signed partnerships with Naver will have to take all the blame.”
But chances are most midsize and large non-life insurers will have to join hands with Naver amid their deteriorating profitability in the car insurance business due to rising repair costs.
Samsung Fire takes up more than half the online car insurance market share.
For this reason, more non-life insurers are under pressure to partner with Naver to expand their presence online as competition gets tougher.
A website of Naver Financial
Samsung Fire CEO Choi Young-moo
Naver CEO Han Seong-sook