Introduction of Insurance Sales Specialist Companies: Strengthening GA Responsibility for Consumer Protection

The introduction of the Insurance Sales Specialist Company system is imminent, with strengthening the responsibilities of General Agencies (GAs) becoming a key issue. 

The introduction of the Insurance Sales Specialist Company system is imminent, with strengthening the responsibilities of General Agencies (GAs) becoming a key issue. Due to the intense competition among GAs for scouting insurance agents and the resulting consumer harm, the Financial Services Commission is reviewing plans to assign GAs responsibilities at the level of financial institutions. In this blog, we will take a closer look at the background of introducing the Insurance Sales Specialist Company system, the current status of GAs, and the future outlook.

1. Background and Necessity of Introducing the Insurance Sales Specialist Company

The influence of GAs in the insurance industry has been steadily increasing. Due to their ability to sell products from multiple insurance companies simultaneously, many insurance agents are moving to GAs that offer higher commissions and better working conditions. However, frequent turnover of agents has led to inadequate follow-up management for existing customers, and consumer harm, such as incomplete sales, has increased.

The Financial Services Commission plans to address these issues by introducing the Insurance Sales Specialist Company system, which would grant GAs responsibilities at the level of financial institutions. This initiative aims to strengthen GA responsibilities and provide more robust consumer protection.

2. Intense GA Scouting Competition and Consumer Harm

Currently, the competition among GAs for scouting insurance agents is extremely fierce. In their bid to attract top talent, they offer high commissions and better business environments, leading to a situation where customer care is often neglected. For example, it is common for customers who already have cancer insurance to be encouraged to switch to another policy under the pretext of a "new product with enhanced coverage," a practice known as "unfair switching." In this process, consumers may suffer financial losses or coverage discontinuities.

The Korea Insurance Research Institute has pointed out that inappropriate incentive structures can create conflicts of interest between consumers and sellers, leading to incomplete sales. Therefore, there is a growing need to improve the commissions and incentives given to insurance salespeople to foster positive behavior and strengthen consumer protection.

3. Introduction of the Insurance Sales Specialist Company System and Expected Effects

An Insurance Sales Specialist Company differs from existing GAs in that it can both handle and mediate insurance contracts. If this system is introduced, GAs will have enhanced authority, but they will also face greater responsibilities for consumer protection. For instance, they may be required to report incomplete sales and maintain insurance contract retention rates above a certain level.

Additionally, by reinforcing the "separation of manufacturing and sales" structure, which separates the manufacturer of insurance products from the seller, the responsibilities of GAs will become clearer. This is expected to improve the consumer experience and increase trust in the insurance industry.

4. GA Industry Response and Future Outlook

The GA industry has generally welcomed the introduction of the Insurance Sales Specialist Company system, as increased responsibilities are expected to come with greater authority. It is seen as an opportunity to evolve from a simple insurance product distributor into a specialized company that performs various roles, including contract mediation and consumer protection.

The introduction of the Insurance Sales Specialist Company system is anticipated to reduce consumer harm caused by excessive competition among GAs and enhance overall trust and stability in the insurance industry.

The introduction of the Insurance Sales Specialist Company system will be a significant change, strengthening both the responsibilities and authority of GAs to better protect consumers. It remains to be seen whether the insurance industry will use this change to curb excessive competition and provide better services to consumers. We look forward to how this initiative will promote healthy development in the insurance sector and improve consumer satisfaction.