74% of Designers "Postpone or Advance Insurance Enrollment... Adjust Performance Themselves"
"Reducing Salary and Receiving Unemployment Benefits Will Worsen Employment Insurance Finances"
[Asia Economy Reporter Oh Hyung-gil] "Since the outbreak of the novel coronavirus infection (COVID-19), while some insurance agents have struggled to make a living due to difficulty in increasing their performance, a considerable number have reduced their income by adjusting their commissions and even received disaster relief funds. Who can guarantee that after enrolling in employment insurance and preparing to change jobs, they will not claim unemployment benefits?"
As the government pushes for mandatory employment insurance enrollment for special employment workers (SEWs), there is growing controversy over 'moral hazard' within the insurance industry. Numerous posts expressing concerns about this issue have appeared on internet portal communities. Since insurance agents, who are 'sole proprietors,' can voluntarily delay insurance contracts and adjust their income at will, there are criticisms that this aspect could be exploited.
According to the insurance industry on the 2nd, a recent survey conducted by the Insurance Agency Association targeting 1,245 insurance agents found that 74% of respondents said they could control their workload (performance) themselves. Because they conduct one-on-one sales with customers, it is entirely possible to offer better terms to expedite contracts or postpone them to the next month.
The insurance industry points out that the high voluntary turnover rate of agents and their ability to adjust income are factors that could cause confusion after enrollment in employment insurance. There are concerns that delaying contract timing to reduce income for a certain period and then receiving unemployment benefits could become a side effect.
According to the survey, the most common average monthly income for agents is in the 1.5 to 2 million KRW range (21.7%). When simulating unemployment benefits based on 2 million KRW, it shows that one can receive 60,000 KRW per day, totaling 9 million KRW over five months. If an agent delays contracts and quits the insurance company, they can receive unemployment benefits and then sign contracts again after reemployment.
Previously, when the first and second rounds of disaster relief funds were distributed, they were calculated based on health insurance premiums, leading to cases where agents earning over 60 million KRW annually also received support funds.
For insurance agents, the simple expense ratio is 77.6% for income up to 40 million KRW and 68.6% for income exceeding 40 million KRW, meaning that even with high income, a large portion can be treated as expenses. This explains why those earning 60 million KRW could have low health insurance premiums and thus qualify for support funds.
A significant number of agents do not want to enroll in employment insurance due to concerns about their income being exposed. In a survey conducted by the Korea Chamber of Commerce and Industry targeting 249 SEWs, 46.2% opposed mandatory employment insurance application for SEWs.
The main reason for not wanting to enroll in employment insurance was 'almost no risk of unemployment' at 42.1%, followed by 'concerns about income exposure' (31.4%) and 'burden of employment insurance premiums' (20.7%).
An official from the Insurance Agency Association stated, "We understand that the government is considering measures to allow unemployment benefits if income decreases beyond a certain level," adding, "If moral hazard arises where agents adjust their income to receive benefits, it could negatively impact the employment insurance fund."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
