The Trend of Auto Insurance Buying in Korea
The use of the internet to buy personal auto insurance in Korea has been growing rapidly over the last five years. Premium income from the internet-based distribution channel or so-called the cyber marketing (CM) channel increased more than twice to KRW 4,603.5 billion from 2017 to 2021. By contrast, premiums from the traditional face-to-face channel decreased by 3% to KRW 5,894.4 billion over the same period. Although face-to-face sales accounted for the biggest share (46.1%) of the total personal car insurance premium income in 2021, there has been a continued decline in the share of the traditional distribution channel over the past five years.
In terms of the number of insured vehicles, the CM channel overtook the face-to-face channel for the first time in 2021 since the launch of the internet-based auto insurance sales. Its share reached 40.7% in 2021 up from 24.4% in 2017, while the proportion of the face-to-face channel fell to 39.9% from 51% over the same period. The other online channel – telemarketing – also saw its share drop from 24.6% to 19.4%
Cheaper prices and greater convenience are the primary merits of purchasing insurance through the internet using computers or mobile phones. Online aggregators, which allow consumers to easily compare the cost of coverage from one company to another, have been widely used by younger consumers who are comfortable buying products of all kinds over the internet. It is not surprising that the growth of personal auto insurance sales through the CM channel has been led by insurance buyers in their 20s – 40s. The CM channel take-up rate of personal auto insurance was highest at 61.8% among those in their 30s, followed by 57.7% among those aged 29 or younger and 48.2% among those in their 40s.
Given that car insurance is a highly standardized policy, consumers find it much easier to buy a personal auto insurance policy online directly without the aid of an insurance agent compared to other insurance products. In particular, the requirement of entering a set of vehicle information that is necessary to price an auto insurance policy has been removed from the online insurance application process thanks to the introduction of a system that provides all necessary vehicle information at once only with an input of vehicle registration plate numbers. The system was developed by the Korea Insurance Development Institute in 2019. This vehicle information data service made it more convenient for consumers to purchase car insurance over the internet.