The Hidden Cost of the GA 1st Place Race: Abandoned Insurance Consumers

In the competitive race to be the top General Agency (GA) in the insurance industry

In the competitive race to be the top General Agency (GA) in the insurance industry, an alarming trend is emerging—insurance consumers are increasingly being neglected. As insurance agents frequently change jobs or leave the industry, more and more policyholders are left without proper management, resulting in what is known as "orphan contracts." This phenomenon has reached a troubling scale, with over 4 million such contracts being created annually, leaving consumers vulnerable and unprotected.

The insurance industry is currently experiencing a significant increase in the number of "orphan contracts," where policyholders are left without an assigned insurance agent due to the agent's departure from the company. According to the Financial Supervisory Service, the retention rate of exclusive insurance agents last year was only 33% for life insurance companies and 52% for non-life insurance companies. Similarly, the retention rate for agents at General Agencies (GAs) was just 47.9%, indicating that more than half of the agents leave within a year.

The high turnover of insurance agents is closely linked to the rapidly changing business environment. GAs have been aggressively recruiting agents by offering higher commissions and settlement support than insurance companies. Many agents prefer working at GAs because they can sell products from multiple companies, unlike exclusive agents who are limited to a single company’s products. As a result, the number of agents at GAs has surged, with the total number of GA agents increasing from 178,755 in December 2022 to 198,517 in just one year.

One of the most notable examples of rapid growth is Hanwha Life Financial Service, a subsidiary of Hanwha Life. The number of agents at this GA increased from 19,131 in 2022 to 22,609 by the end of last year. Hanwha Life has also established additional subsidiary GAs, further expanding its reach. Other large GAs have also been growing, with companies like Inka Financial Service, GA Korea, and Global Financial Sales all increasing their agent numbers.

However, as GAs expand, consumer harm has also grown. Each year, over 30 million insurance contracts are transferred to new agents due to the departure of the original agent. Although new agents take over these contracts, they do not receive any financial benefit from them, making it difficult for them to provide comprehensive service. As a result, many policyholders receive inadequate management of their policies, leading to situations where insurance contracts lose their validity due to missed payments that go unnoticed.

The burden on remaining agents is also increasing, as the number of transferred contracts often exceeds the number of new contracts each month. This situation creates a significant strain on agents who must manage these orphan contracts without the corresponding financial incentives.

The insurance industry has responded by offering more bonuses and settlement support to attract agents, leading to further job changes and large-scale contract transfers. Unfortunately, this focus on agent recruitment and sales performance comes at the expense of consumers, who are left without proper support and risk losing their insurance coverage.

The growing issue of orphan contracts in the insurance industry highlights the need for systemic changes. The Insurance Research Institute has suggested that long-term retention of agents, incentives based on policy maintenance, and customized planning are essential for ensuring continuous consumer service. Additionally, regulatory authorities must establish standards for orphan contracts and develop management indicators to monitor and publicly disclose the situation regularly. Without these measures, the competitive pursuit of GA dominance will continue to leave consumers at risk, undermining the very purpose of insurance.