The Rise of General Agencies (GAs): Emerging as a Dominant Insurance Sales Channel

General Agencies (GAs) have established themselves as a powerful insurance sales channel in South Korea

Despite a relatively short history, General Agencies (GAs) have established themselves as a powerful insurance sales channel in South Korea, with approximately 260,000 agents as of last year. GAs began to gain momentum during the IMF crisis, as former insurance company employees pioneered this new market. Recently, even primary insurance companies have recognized the growing influence of GAs by establishing subsidiary GAs. This article explores the history of GAs, the factors driving their growth, and the future of this evolving industry.

General Agencies, or GAs, have rapidly emerged as a key sales channel in the South Korean insurance market. Unlike traditional insurance companies, GAs are independent agencies that are not tied to a specific insurer. Instead, they offer consumers a variety of insurance products from multiple companies, allowing for a broader comparison and more personalized recommendations.

The history of GAs dates back to 1993 when the government first allowed the 'multi-agency system,' permitting the sale of products from two different insurance companies. In 1996, the system evolved with the introduction of the 'independent corporate insurance agency system,' which enabled GAs to sell products from more than two insurers. The market saw significant growth following the IMF crisis, when many employees from primary insurance companies, impacted by restructuring, established GAs, marking the beginning of rapid expansion.

In the early 2000s, as the IMF crisis subsided, GAs focused on selling auto insurance began to gain traction. Companies like Prime Innet (now Prime Asset) entered the market, signaling a shift in insurance sales channels. The period between 2005 and 2006 saw the rise of GAs such as IFC, Mega, and Rich & Co., which heralded the beginning of the GA era.

In 2003, the introduction of bancassurance—a non-exclusive distribution channel—further diversified the market. By 2008, the system had expanded to allow cross-selling between life and non-life insurance companies, prompting insurers to adapt their sales strategies to include GAs as a critical component.

From 2009 onwards, smaller GAs began forming alliances to compete with larger entities, as size allowed them to negotiate better commission rates with insurers. Additionally, mergers between life and non-life-focused GAs enabled these organizations to offer a wider range of products, further enhancing their market influence.

However, the rapid growth of GAs also brought challenges. In 2011, some GAs prioritized selling high-commission products over customer suitability, leading to an increase in mis-selling. At the time, the mis-selling rate among GA-affiliated agents was 0.78%, significantly higher than that of direct insurance companies. In response, financial regulators implemented various measures, including the establishment of best practice guidelines for GA internal controls in 2010, enhanced monitoring and inspection in 2013, and the introduction of the GA Monitoring System (GAMS) in 2018.

Moreover, the Korea Insurance Agents Association introduced the GA Certified Agent program in 2018, aimed at improving consumer satisfaction and increasing trust in GAs through higher standards of professionalism. This initiative has helped maintain the reputation of GAs, rewarding agents who meet stringent criteria with various benefits.

As a result of these efforts, the mis-selling rate among GA agents has steadily declined from 0.78% in 2011 to 0.04% in 2022. Compared to exclusive agents, GA agents now boast lower mis-selling rates—0.02% for life insurance and 0.003% for non-life insurance.

Recognizing the potential of GAs, primary insurers have also begun to establish subsidiary GAs. In 2021, Hanwha Life and Mirae Asset Life Insurance created their own subsidiary GAs, successfully separating their sales channels. Hanwha's GA, Hanwha Financial Services, achieved a net profit of approximately 68.9 billion KRW last year, marking the first profitable turnaround for a subsidiary GA. Mirae Asset Financial Services also reported a net profit of 6.6 billion KRW, indicating a successful transition to profitability.

 GAs have evolved from a simple insurance sales channel into a powerful player in the insurance market. Their growth has brought significant changes to the industry, offering better consumer experiences and driving innovation in sales strategies. As GAs continue to expand their role, they are expected to become even more integral to the future of the insurance industry.