With limited level of competition, Korean auto insurance market has grown rapidly. During the last decade, price increase and rapid growth of car ownership led the auto insurance market to maintain annual growth of 20% except in 1997 and 1998. However, a sense of crisis such as price deregulation, increasing claim rate, and direct channel entry has heightened the saturated domestic auto insurance market. Especially full price deregulation of auto insurance is likely to lead an insurance price war starting last August and eventually it will be one of the critical factors for insurers' survival.
Based on this understanding this paper proposes a key strategic initiative to be implemented on channel and product. In order to build competitiveness of an insurer in the rapidly changing Korean auto insurance market, differentiate between high efficiency and low efficiency channels through benefits and commission. The traditional channel must be radically upgraded and restructured to provide differentiated value for the relationship, brand, and quality segment while at the same time increasing the channel's competitiveness against price competition and alternative channels. Product innovation and the state of art underwriting know-how and tools become paramount, especially in the large volume auto business where the risk differentiating underwriting will be main success factor in the future.