Concerns Over the Spread of Sub-agency Sales in Cardshurance

Recently, in the cardshurance (insurance product sales by credit card companies) market, there has been a proliferation of sub-agency sales methods. This structure, based on outsourcing agreements between credit card companies and corporate insurance agencies (GA), has raised concerns due to issues such as the ambiguity of responsibility for incomplete sales. In this blog post, we will explore the operational methods of cardshurance sub-agencies and the resulting problems.

Structure and Spread of Cardshurance Sub-agencies

According to recent reports in the insurance industry, some credit card companies are moving to activate cardshurance sales in the form of sub-agencies. Unlike typical cardshurance, where an insurance contract is signed by a planner affiliated with the credit card company, the sub-agency model involves the credit card company outsourcing the entire process to a separate insurance agency, while only receiving brokerage fees.

This trend gained momentum following the Financial Services Commission’s (FSC) positive legal interpretation in 2021, which allowed insurance companies to re-outsource product sales to financial institution insurance agencies. Leading the charge, companies like S have established sub-agency sales models, with others like L following suit to expand their presence in the cardshurance market.

Ambiguity of Responsibility

A significant issue with the sub-agency sales model is the potential for compromised transparency in insurance contracts. In a standard cardshurance agreement, the credit card company is fully accountable if any issues arise. However, in the case of sub-agencies, responsibility is divided between the credit card company and the outsourced insurance agency, increasing the risk of each party shifting blame onto the other.

A GA industry representative noted, "From the perspective of credit card companies, sub-agency sales are advantageous because they can outsource the recruitment process and simply collect brokerage fees, making contract management easier compared to standard cardshurance." However, they added, "In the process of increasing the number of outsourcing agencies to secure fee revenues, the ambiguity of responsibility for potential contract issues inevitably increases."

Concerns Over Bypass Contracts and GA Sales Standards

There are also concerns that cardshurance sub-agencies could lead to an increase in bypass contracts within the GA industry. Bypass contracts, prohibited under the Insurance Business Act, involve using another salesperson's name to solicit insurance. The structure of sub-agency recruitment may facilitate such practices. Additionally, there is speculation that some companies might exploit the sub-agency model to circumvent internal control guidelines, which apply to GAs with a certain number of affiliated planners.

An industry insider warned, "There is a risk that sub-agencies might be used as a means to avoid the responsibilities and obligations of an insurance agency, such as managing planners, calculating and paying commissions, and handling complaints." They emphasized the need for the financial authorities to promptly issue guidelines that clearly define the responsibilities and obligations related to the operation of sub-agencies.

The spread of cardshurance sub-agencies poses a significant risk to the transparency of the insurance market and could lead to consumer harm. Clear guidelines and strict management by financial authorities are essential. Cooperation between the industry and regulatory bodies is crucial for the healthy development of the cardshurance market.