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(Yonhap Interview) German insurer ERGO eyes stronger footing in Korean market
By Kim Soo-yeon
SEOUL, Feb. 2 (Yonhap) -- With a new license in hand, ERGO Insurance Group of Germany hopes to secure a more solid footing in the South Korean non-life insurance market by selling a wider range of products, a company executive said Tuesday.
ERGO's direct auto insurance unit in South Korea, ERGO Daum Direct Auto Insurance Co., got regulatory approval in September 2009 to sell six different non-life insurance products.
"We are only selling motor insurance through direct marketing. But we have just obtained extended license to go beyond motor. For ERGO Daum, the strategic ambition is to become the leading direct insurer in Korea," Andreas Kleiner, a member of the board management of ERGO International AG responsible for Asia, said in an interview with Yonhap News Agency.
Aiming to become a comprehensive non-life insurer, ERGO Daum Direct plans to offer personal accident insurance and motor-related products by the end of June and will unveil homeowner insurance products later in 2010, he added.
Kleiner said ERGO plans to maintain its direct distribution channel -- sales of insurance policies through telemarketing or over the Internet -- in South Korea, because it is cost-effective and gives the company a competitive edge.
"In Korea, we see that the direct segment has been growing significantly and tremendously over the last couple of years. We believe that growth will continue. So we see a lot of upside potential," Kleiner said.
But Kleiner said becoming the top direct insurance company doesn't always mean having the largest market share.
"We don't necessarily strive to be the largest. For us, profitability is more important than pure market share."
ERGO, Europe's 12th-largest insurance firm, made its foray into the Korean market in 2008 by buying a 65 percent stake in Daum Direct Auto Insurance Co., an on-line auto insurance unit of Daum Communications Corp., South Korea's No. 2 Internet portal operator. ERGO later renamed it ERGO Daum Direct Auto Insurance.
As part of its expansion, ERGO launched legal protection insurance services -- providing coverage for litigation costs -- in December last year in South Korea via DAS Korea. The German insurance company injected capital worth of 20 billion won (US$17.2 million) into its auto insurance operation late last year, raising its interest in the firm to 68 percent.
Kleiner said ERGO has prioritized growing its non-life insurance business for the time being. ERGO Daum Direct accounts for around 10 percent of the South Korean on-line auto insurance market, according to the company,
"Our key strategic focus in Korea will be non-life insurance. We wouldn't rule out that one day we may do something in life insurance ... But (currently ERGO has) no tangible plans," he said.
When asked about additional plans for capital injection, Kleiner said that ERGO would be "happy to invest" in its Korean operation if necessary, but added he does not see a need to raise more capital in the near term.
Kleiner called the Korean life and non-life insurance markets are "fairly consolidated," so that top players enjoy high market shares, which could help competition move away from lowering prices toward promoting services and quality.
"As the market is dominated by big local players, it is not so easy to establish yourself and compete successfully against very strong and established local players," Kleiner added, when asked about one of difficulties in doing business in Korea as a foreign company.
ERGO, a unit of Munich Re AG, the world's biggest re-insurer, posted premium income of 17.7 billion euros in 2008 and has operations in more than 30 countries.
sooyeon@yna.co.kr
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