1. © 2013 CELENT KyongSun Kong Analyst, Asian Financial Services Group kkong@celent.com Seoul, South Korea A recording of today's webinar and a copy of the presentation will be available to Celent clients on our website at http://celent.com/user/login. OCTOBER 15, 2013 DIRECT INSURANCE IN SOUTH KOREA THE NEED FOR CUSTOMER RELEVANCE

2. Face-to-Face and Direct ChannelsSection 1

3. 2 © 2013 CELENT Life Insurance Industry Direct Channel Market Direct channel insurance revenues have grown steadily, rising with each year: from $117.2 million in fiscal 2007 to $124.5 million in fiscal 2008, $139.9 million in fiscal 2009, $147.8 million in fiscal 2010, and $156.6 million in fiscal 2011. For the period from fiscal 2007 to fiscal 2011, this consistent growth yielded a 7.5% CAGR. Source: Korea Life Insurance Association

4. 3 © 2013 CELENT Life Insurance Industry Direct Channel Market Using fiscal 2011 as the baseline, face-to-face sales are clearly the dominant source—almost monopolizing life insurance revenues. They account for 98.2% of the total. In contrast, direct channel revenues account for a mere 1.8%. Source: Korea Life Insurance Association Ratio of Face-to-Face Channel Versus Direct Channel Revenues in South Korea’s Life Insurance Industry (FY2011 New Business Total: $8.7 Billion)

5. 4 © 2013 CELENT Non-Life Insurance Direct Channel Market Insurance revenues have recorded the following robust growth, rising from $3.0 billion in fiscal 2007 to $3.7 billion in fiscal 2008, $5.1 billion in 2009, $6.1 billion in fiscal 2010, and reaching $6.2 billion in fiscal 2011. For the period from fiscal 2007 to fiscal 2011 this significant growth yielded nearly a doubling of revenues and CAGR of 19.7%. Source: General Insurance Association of Korea

6. 5 © 2013 CELENT Non-Life Insurance Direct Channel Market The figure below contains comparable data for face-to-face channel sales, which indicates that the ratio of revenues generated via the direct channel is small when compared to face-to-face channel sales. The gap between these is great, with the face-to-face channel accounting for 89.1% of the total, while direct channel sales account for only 10.9%. Source: General Insurance Association of Korea

7. Telemarketing’s High ProfileSection 2

8. 7 © 2013 CELENT Telemarketing-Generated Revenues in South Korea’s Insurance Sector Source: Korea Life Insurance Association, General Insurance Association of Korea

9. 8 © 2013 CELENT Principle factors driving the steady growth in telemarketing-generated revenues Steering customers to telemarketing from other channels Changing the target customer Shifting to consulting-driven sales

10. Products Suitable for TVSection 3

11. 10 © 2013 CELENT Home Shopping Insurance Revenues in South Korea’s Insurance Sector Source: Korea Life Insurance Association, General Insurance Association of Korea

12. 11 © 2013 CELENT Product classes most suitable for marketing via home shopping Comparatively simple and standardized products Shorter-term insurance products Lower-priced products

13. Why the Internet Continues to Confound as a Sales Channel Section 4

14. 13 © 2013 CELENT Online Marketing Insurance Revenues in South Korea’s Insurance Sector Source: Korea Life Insurance Association, General Insurance Association of Korea

15. Directions in Mobile InsuranceSection 5

16. 15 © 2013 CELENT Directions in Mobile Insurance Many insurers have introduced smartphone applications, with the most common service offering being inquiry features with other services principally designed to offer potentially useful information to customers. While only a portion of non-life insurers have taken the plunge, a few are offering one-stop insurance sales services — from calculating premiums to actually taking out a plan — for a limited scope of products via smartphone applications. Despite the above progress, the road ahead will be long as insurers seek to parlay mobile channels into bona fide sales channels. Rather, the current mobile services seem to be devoted to supporting insurance policyholders in better managing their insurance. Moving ahead, many insurers are intent on developing and using the mobile arena as a channel following in the footsteps of banks and securities firms. That process seems certain to come with challenges, such as requiring additional thought about devising insurance products tailored to mobile channels and distinct from the direct channel offerings seen so far.

17. The Future of Direct Channel SalesSection 6

18. 17 © 2013 CELENT The Future of Direct Channel Sales Enhancing online channel sales Simplifying products Enhanced call centers Centralizing direct channel management Battle over credit card fees

19. ConclusionSection 7

20. 19 © 2013 CELENT Proposals for Insurers It is important to realize that the face-to-face and direct channels cater to different demographics. To avoid post-contract trouble or disputes due to insufficient explanation or information provision, a simple and easy-to-understand product mix is key. This can be achieved in part by minimizing special riders and clauses. In addition to simplifying products, insurers will want to craft or streamline their product lineups in a manner that makes it easy for customers to select a product. Insurers will need to design products in line with the unique attributes of each direct channel. In conjunction with this, companies will want to set prices to differentiate direct channel products from their face-to-face brethren. Channel management will be an important way to strategically leverage direct channel sales. Efficient management of multiple channels can also be expected to improve understanding of customer behavior as well as orchestrate more strategic business development. Streamlining and centralizing channel management will better enable the crafting of channel-appropriate strategies. It will be incumbent upon insurers to dispel the stereotype that a direct channel is a channel where information travels only in one direction. Likewise, insurers would do well not to forget that consumers have a deep-rooted desire for advice. To bridge this gap, insurers will need to create a space for communicating with customers, such as enhancing their call centers or taking advantage of social networks. In addition, training staff to do more than simply reply to customer queries, but rather be proactively offering advice in the role of consultants will also be important.

21. 20 © 2013 CELENT My contact information: kkong@celent.com My business development colleague: maquino@celent.com A recording of today's webinar and a copy of the presentation will be available to Celent clients on our website at http://celent.com/user/login. Thank you!