(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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