Approval of Kakao's digital insurance unit to boost innovation: experts

The Financial Services Commission's preliminary approval of Kakao Pay’s insurance subsidiary as an online-only insurance firm and of three peer-to-peer companies is expected by industry experts to pave the way for the country’s innovation in finance.

The approval makes Kakao Pay South Korea's first digital-focused general insurance company, which sells 90 percent or more of its insurance products via telecommunication.

The new digital insurance company can utilize mobile giant Kakao’s technologies and platform to contribute to the promotion of consumer benefits, competition, and innovation in the insurance industry.

The company will partner with Kakao’s subsidiaries, including Kakao Mobility and Kakao Kids, offering various non-life insurance products.

Kakao Pay, which is gearing up for an initial public offering later this year, seeks to launch its insurance company within the year.

However, Kakao Pay still needs to apply for the final approval within six months.

Kakao Pay holds 60 percent while Kakao owns the remaining 40 percent of the general insurance firm.

The FSC also approved People Fund, 8 Percent, and Lendit as the first group of peer-to-peer companies under the Act on Online Investment-Linked Financing and User Protection.

The FSC said the new law protects P2P service users better as it reinforces investor protective measures.

The financial regulator will continue to review applications by other P2P firms, which need to register with the government by Aug. 26, 2021, to abide by the new law.

As of June 9, 41 P2P companies have applied for registration as online investment businesses.