Online players faring well as auto insurance sales fall

Market share of direct insurers rises to 20 percent of the pie

February 13, 2009

Auto insurance sales fell sharply last month as the economic turmoil drove less people to buy cars, according to insurers.

Online stores weathered the slowdown better than the traditional type thanks to bargain hunters, they said. The online market share grew to about 20 percent.

According to data provided by General Insurance Association of Korea and individual member insurers, 858.3 billion won ($610.8 million) worth of auto insurance was sold in January, 9.3 percent less than the 946.7 billion won sold in January 2008.

Over the April 2008-January 2009 period, auto insurance sales only rose 1.5 percent from the same period a year earlier, the data showed. This is due to a steep decline in car sales. Local carmakers sold 73,537 new vehicles last month, 23.9 percent less than a year earlier.

Many opted to buy used cars, which are also less expensive in terms of insurance, insurers said.

“Most people buying a new car subscribe to physical damage coverage, but used car buyers are doing it less,” said a spokesperson from the General Insurance Association of Korea. Physical damage coverage, which is for damage to the vehicle, is optional.

Some tried to cut costs by buying insurance through direct insurers, said the companies. Online sales amounted to 171.6 billion won last month, accounting for 19.99 percent of all auto insurance sales, at 858.3 billion won for the month. The online market share continued to rise from 18 percent in October to 18.3 percent in November and 18.9 percent in December.

Direct insurers, called online insurers in Korea as sales occur by telephone or the Internet, sell insurance for an average of 15 percent less than traditional insurers, as they save on the cost of consultants and a physical network.

There are 15 car insurance companies in Korea, and 11 of them - except Samsung Fire and Marine Insurance, Hyundai Marine and Fire Insurance, LIG and AIG - sell online.

Four of the 11 firms operating online, such as Kyobo-AXA General Insurance, only sell policies via the Internet.

The online market is expected to continue to grow, as Samsung Fire and Marine plans to enter the field next month. Samsung, the biggest car insurer in Korea with about a 28 percent market share, had stuck to offline sales as part of its premium marketing strategy.

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