Is the Introduction of the Insurance Sales Specialist Company System a New Beginning for the Insurance Industry?

In a recent meeting between the Financial Services Commission (FSC) and the insurance industry

In a recent meeting between the Financial Services Commission (FSC) and the insurance industry, FSC Chairman Kim Byung-hwan expressed interest in reviewing the introduction of an 'insurance sales specialist company' system. This announcement has reignited hopes among General Agencies (GAs) for a long-awaited change. Let's explore the potential impact of this system, which is already implemented in developed insurance markets like the U.S., UK, and Japan, and what it could mean for the domestic insurance market.

A new wave of change is sweeping across the insurance industry. In a recent meeting with the insurance sector, FSC Chairman Kim Byung-hwan officially mentioned considering the introduction of the ‘insurance sales specialist company’ system. Will this long-awaited system finally become a reality for GAs?

What Are GAs and the Insurance Sales Specialist Company System?

An insurance sales specialist company is a type of GA that holds negotiation rights over business expenses with direct insurers while assuming liability for seller indemnity and compliance with business regulations set by financial authorities. This system is already in place in advanced insurance markets such as the U.S., UK, and Japan. Although discussions on introducing the system began in Korea with the 2008 Insurance Business Act amendment proposal, it was met with strong opposition from direct insurers and never made it through the National Assembly.

Why Is the Insurance Sales Specialist Company System Necessary?

In the Korean insurance market, GAs have emerged as a key sales channel, capturing over 40% of the market share based on the number of agents. This indicates a significant increase in the stature of GAs, prompting some direct insurers to establish GA subsidiaries by separating their captive agent organizations. This trend suggests that the separation of product manufacturing and sales—known as 'product and sales separation'—has become inevitable in Korea, as it has in other developed markets.

However, while the influence of GAs is growing, there is also an increase in consumer harm due to excessive competition among GAs. The insurance sector in Korea has the highest number of consumer complaints in the financial industry, many of which involve improper sales practices, such as unfair replacements caused by the frequent movement of agents between GAs. To resolve these issues, clearer regulations and responsibilities for GAs are necessary.

The Path to Accountability and Trust for GAs

The foundation of the insurance industry is consumer trust. The reason financial authorities and the insurance sector are engaging in reform discussions is to find ways to restore this trust. If the introduction of the insurance sales specialist company system can help monitor GA sales practices and assign liability for consumer harm, thereby establishing a healthier sales order, there is no reason to delay it. In fact, this change should be expedited.

The introduction of the insurance sales specialist company system could strengthen the role of GAs while enhancing consumer protection and restoring market trust. Moving forward, we hope that this system will lead the insurance industry towards a more transparent and responsible direction. As the winds of change blow, may they guide the insurance industry toward a healthier market future.