Is Kakao Pay revving up to launch online insurer?

After the Financial Services Commission (FSC) granted preliminary approval for Kakao Pay’s digital insurance business earlier this month, noting that the company met all the necessary requirements to operate the business here, market watchers are closely monitoring the company’s moves to get Kakao Insurance, its online non-life insurance affiliate, off the ground.

According to industry sources, Kakao Pay recently met with other major insurers here to discuss the possible sale of KP Insurance Service, one of its insurance subsidiaries, in order to streamline its business structure prior to the official launch of Kakao Insurance, possibly later this year.

Kakao Pay acquired KP Insurance Service in July 2017. KP Insurance Service was Korea’s first “insurtech” firm that introduced the use of technological innovations designed to maximize savings and efficiency compared to the prevalent insurance industry model. It also brought in crowd-sourcing by allowing customers to freely form a group to receive the same level of insurance benefits. The company allows customer groups to negotiate with various insurers to select the best plan for them through the service platform.

However, what seems to be concerning Kakao Pay is the fact that KP Insurance Service is a general agency company, meaning that it can work for more than one insurance company and not necessarily remain loyal to one. Currently, KP Insurance Service sells products for around 12 local insurance companies, including Hanwha, Meritz and DB Insurance.

Market insiders say the model could create synergy with offlinebased local insurers, as KP Insurance Service could fill the void in the more traditional insurance market model. There have been questions as to how Kakao Insurance’s business model could create synergy with the insurtech firm.

As a result, Kakao Pay’s recent talks with local insurers about the sale of KP Insurance Service are viewed as a move to focus on providing its own digital insurance plans and devising a new strategic business model, rather than having a general agency subsidiary.

Kakao Pay officials, meanwhile, said the meetings with insurers were not specifically focused on selling the firm.

“All we can say is that meetings with other insurers happen quite often for ordinary reasons, and they weren’t specially organized for a possible sale,” one official told The Korea Times.