Market Trends of South Korea Motor Insurance Industry
Rises in adoption of electric vehicles is driving the growth of the motor insurance industry
The motor insurance market is facing both challenges and opportunities as the mobility sector continues to evolve. In Korea, the number of registered EVs increased by 68.4 percent to 389,855 as of the end of 2022, compared to the previous year. EVs still account for 1.5% of total registered vehicles, but their share has been growing rapidly in recent years. This growth is expected to continue as EV sales increase due to advances in battery technology, increasing consumer awareness of environmentally friendly lifestyles, and government efforts to encourage carbon neutrality and encourage EV adoption, such as battery subscription services, which will reduce the cost of an EV, as well as financial incentives, such as tax credits, and direct purchase subsidies, to encourage EV sales.
An estimated 157,000 electric vehicles (EVs) were insured in Korea in 2022, which represents 0.9% of the total number of cars insured under personal motor insurance policy. The number of EVs insured has been increasing steadily lately, which is in line with the increase in the number of EVs in the country. The CAGR of EVs insured in Korea is 59.3% from 2018 to 2022, whereas the total number of vehicles insured in personal motor insurance increased by an average of 2.7% each year during the same period. Foreign cars made up 35.8% of EVs insured in 2022, which is an increase from 19.6 % in 2018.
Due to the new and fast-changing nature of electric vehicle (EV) technology, insurers have found it difficult to offer adequate insurance coverage to EV drivers at affordable prices. However, the increase in EVs also opens up new business opportunities. Korean insurers have created and published motor insurance riders for EV drivers that allow them to expand or modify their car insurance coverages. These riders include covers for EV battery replacement, additional repair costs for EVs, longer distance towing in case of EV breakdown or failure, and risks associated with charging EVs (fire, explosion, electrocution).
In the future, a new growth sector for internet insurance will likely emerge
The online insurance segment is witnessing the fastest growth in South Korea's motor insurance market during the forecast period. Owing to the ease of buying an online insurance policy, guidance is provided regarding discounts, offers, and plans by aggregators like Policybazaar, boosting the confidence of consumers in buying online insurance. Also, the growing penetration of the internet is contributing to the growth of this segment. The initiative was taken by the Insurance Regulatory and Development Authority to permit insurers to conduct video-based KYC, supporting the growth of online insurance.
Purchasing personal auto insurance online has become increasingly popular in Korea over the past 5 years. Premium revenue from the online distribution channel, also known as the cyber marketing channel (CM), more than doubled between 2018 and 2022, rising from KRW 4.03 to 4.5 billion.
Car insurance is one of the most standardized policies. Compared to other insurance products, it is much easier for consumers to buy personal auto insurance online directly without the help of an insurance agent. In particular, the need to enter a set of vehicle data that is necessary for pricing an auto insurance policy is removed from the online insurance application process. The system provides all the necessary vehicle information at the same time only with the input of the vehicle registration number. This vehicle information data service was created by the Korea Insurance Development Institute (KIDI) in 2019. It made it easier for consumers to shop for car insurance online.
