Korea's first digital insurer Carrot absorbed into parent after losses

Korea Herald

01-05-2025

Carrot's quiet exit underscores hard limits of online insurance in market still anchored in face-to-face sales
Carrot General Insurance, once hailed as South Korea's pioneering digital insurer, is set to be folded into its parent company Hanwha General Insurance, marking a bitter close to its seven-year foray into digital-first insurance.
Hanwha General announced Tuesday it had acquired 25.86 million shares in Carrot for 205.6 billion won ($144.43 million), boosting its ownership to 98.3 percent. The deal included the purchase of stakes from key investors such as Tmap Mobility, Stic Investments, Altos Ventures, Affirma Capital and Hyundai Motor Company.
The acquisition is widely seen as a precursor to a full merger between the two insurers. In early April, Hanwha General stated it was considering various options for Carrot, excluding a sale. The company is expected to finalize its decision at an upcoming board meeting, with an announcement slated for May.
Some of Carrot's investors are believed to have exited after incurring losses. Each investor reportedly sold their shares to Hanwha General at different prices, with the average deal valuing Carrot stock at around 8,000 won per share. That includes Affirma Capital, which invested in 2022 when shares were valued at roughly 15,000 won. Hanwha General itself is also believed to have taken a hit, considering the scale of its cumulative capital injections into Carrot over the years.
Carrot was launched by Hanwha General Insurance in May 2019 as Korea's first internet-only general insurer. It gained attention with its signature pay-per-mile auto insurance, which calculates premiums based on actual driving distance — offering a sharp contrast with conventional plans that require full annual payments regardless of usage.
Despite early expectations for innovation, Carrot failed to turn a profit, posting net losses for six consecutive years. Its annual loss peaked at 84 billion won in 2022, before narrowing slightly to 66.2 billion won last year. The accumulated loss is estimated to be around 330 billion won. Financial soundness also eroded, with its K-ICS capital adequacy ratio plunging from 656 percent in 2022 to 156 percent last year — barely above the 150 percent threshold recommended by local regulators.
Industry watchers say Carrot failed to break through in the broader insurance market, limited by its digital-only model. The local insurance sector remains dominated by traditional firms that rely heavily on in-person sales, while digital products like auto insurance — Carrot's core offering — are typically short-term, low-premium products with thin margins.
"Long-term guarantee products, key profit drivers for insurers, remain difficult for consumers to navigate online," said an official from another local insurance company. "The asymmetry in information, combined with complex terms and coverage, makes it hard for the average person to grasp without an agent's guidance. As a result, those seeking such products still turn to traditional channels over digital-only insurers.'
A 2024 report from the Korea Insurance Research Institute highlighted the gap, revealing that just 0.6 percent of life insurance and 6.2 percent of general insurance products were purchased online.
Carrot's merger may sound an alarm to other digital insurers here, most of which survive on repeated capital injections from parent firms as losses pile up. All five players — Carrot, Kyobo Life Planet, Shinhan EZ General Insurance, Kakao Pay Insurance and Hana General Insurance — posted net losses last year, totaling 188.6 billion won.
However, the industry official cautioned against framing Carrot's merger as a complete failure.
'Digital innovation in finance is a long-term endeavor, one that companies expect to take at least a decade,' the official said. 'Even with its limitations, Carrot carved out a unique strategy that could ultimately support Hanwha's digital ambitions following the merger.'
While sluggish demand from younger generations — the core target for digital insurers — has slowed progress, the official noted that momentum is building.
'Demand is rising, gradually but steadily. Digital adoption is already widespread in short-term insurance, and as technology and infrastructure evolve, digital channels will increasingly support long-term insurance products.'