South Korea’s financial authorities have decided to treat GAs (General Agency), which have grown into major companies within insurance industry, as financial companies. As a result, GAs with more than 500 employees need to adopt an internal control system identical to that of insurance companies and hire an executive-level voluntary restraint law-abiding monitor.
Financial Services Commission (FSC) announced ‘Internal Control of Major General Agencies and Improvement in Education for Insurance Planners’ on the 5th.
This measures applies the reality that ‘quality of insurance sales’ still does not meet expectations of consumers although importance of recruitment channel that is in direct contact with consumers to recommend and explain insurance products is huge.
Percentage of face-to-face channels within insurance industry is still huge. Percentages of face-to-face channels for insurance planners and insurance agencies are 93.3% and 88.6% for life insurance and indemnity insurance respectively. GAs that sign consignment contracts with many insurance companies made their first appearance in 2013 and they have grown very rapidly. Actually, number of insurance planners under GAs recently surpassed number of insurance planners under insurance companies. As of June of last year, there were 57 major GAs with more than 500 insurance planners and 3 mega GAs with more than 10,000 insurance planners.
As a result, financial authorities have decided to tighten up internal control by applying regulations that are applied to financial companies to major GAs.
First, financial authorities told major GAs to establish departments that support law-abiding monitors and carry out internal control independently. Mega GAs with more than 1,000 insurance planners must set up departments that support law-abiding monitors.
FSC told Insurance Agency Association to establish good standards so that departments can be constituted proportional to number of insurance planners. It has also decided to guarantee a term for at least 2 years..
It has also decided to tighten up requirements for law-abiding monitors. As a result, law-abiding monitors will be at least executive-level monitors. They also need to have 10 years of experiences just like insurance companies when it was 5 years of experiences previously.
Financial authorities have decided to prepare 3-step internal control that requires operating groups, law-abiding monitors, and a board of directors to examine condition of internal control once a year.
“This internal control standard will be the first thing that Financial Supervisory Service will look at whenever it inspects agencies in the future.” said a representative for FSC. “Based on information confirmed by law-abiding monitors, we are planning to sanction those that do not meet our requirement.”
Staff Reporter Park, Yoonho | yuno@etnews.com