New Standards for GA Industry Settlement Support Funds Set to Reshape the Insurance Sector

The GA industry is on the brink of enforcing new guidelines designed to curb the excessive practices in settlement support fund payments

The imminent implementation of the GA (Corporate Insurance Agency) industry's new guidelines on settlement support funds has drawn significant attention from within and outside the industry. This marks the first time that financial authorities have actively stepped in to address the excessive practices surrounding settlement support payments. In this post, we'll explore the key aspects of these new guidelines and how they are expected to impact the insurance industry.

The GA industry is on the brink of enforcing new guidelines designed to curb the excessive practices in settlement support fund payments. Earlier this year, financial authorities recommended that the GA industry establish its own standards for these payments, prompted by concerns over the inappropriate calculation methods used by some GAs.

These guidelines emphasize preventing lump-sum payments of settlement support funds to agents, encouraging a system of installment payments instead. Initially, the guidelines included a cap on payments; however, this was later revised to focus on expanding the criteria for fund recoupment. The recoupment criteria now include various indicators of sales integrity, such as contract retention rates, mis-selling rates, and the number of customer complaints.

While the GA industry welcomes these guidelines as an internal control measure, some have raised concerns that the recoupment criteria should consider the unique characteristics of different sales channels. For instance, the telemarketing (TM) channel often has lower retention rates compared to face-to-face sales, which could unfairly disadvantage agents if not properly accounted for.

To address these concerns, financial authorities have allowed each GA to tailor the guidelines to their specific sales channels. This flexibility enables GAs to create standards that reflect their operational realities, which is expected to reduce issues related to mis-selling and consumer harm across the industry.

The implementation of the new settlement support fund guidelines in the GA industry is poised to bring significant changes to the insurance sector. This move by financial authorities aims to curb the excessive competition driven by these payments, ultimately protecting consumers and fostering a more transparent and fair insurance market. It will be interesting to see how the GA industry adapts to these changes and implements the new standards.