New Licenses for Small-Amount Short-Term and Digital Insurers... ESG Incentives Established

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Enhancing Consumer Protection Mechanisms for Insurance Contracts... Implementing 'Consumer Alerts'
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[Asia Economy Reporter Kwangho Lee] The government plans to newly license small-amount short-term insurance companies and digital insurance companies to activate small-amount insurance closely linked to the daily lives of the public and online insurance. It will also improve regulations to enable insurance solicitation through non-face-to-face and artificial intelligence (AI), and strengthen sales procedures by actively issuing "consumer alerts" for products that raise consumer damage concerns. In the second half of this year, the "4th generation real loss medical insurance" will be launched to enhance the fairness and sustainability of premiums for new real loss medical insurance. Policy incentives will also be prepared by including detailed evaluations of ESG (environment, social, governance) management and investment in the non-quantitative evaluation items of insurance company management performance evaluations.

Four Major Strategies and Twelve Core Tasks Established

On the 1st, the Financial Services Commission announced the 2021 insurance industry policy direction containing these details.

The Financial Services Commission plans to support sustainable innovation and growth of the insurance industry facing rapid environmental changes such as low growth, low interest rates, aging population, COVID-19, and digital innovation, and to enhance consumer trust. To this end, it has established four major promotion strategies and twelve core tasks, including industrial structure improvement, enhancement of consumer trust and satisfaction, strengthening social safety net functions, promoting digital innovation in the insurance industry, and improving insurance company management and culture.

First, to activate various customized insurance products that meet consumer needs, it plans to newly license small-amount short-term insurance companies. To promote the entry of new players leading non-face-to-face and digital financial innovation, digital insurance companies will also be additionally licensed. Currently, Kyobo Life Planet (life insurance) and Carrot General Insurance (non-life insurance) have entered, and preliminary approval for Kakao Pay is under review.

The Financial Services Commission will prepare a new licensing policy in the first half of the year, considering the entry of innovative companies such as fintech into the insurance business and the establishment of insurance companies specialized in products and channels.

It will also improve regulations to enable insurance solicitation through non-face-to-face and AI methods and expand platform-based service innovation.

Currently, agents are required to meet customers face-to-face at least once, but this will be exempted if safety measures such as explanation and recording of important matters by phone and confirmation of recordings by insurance companies are in place. Insurance solicitation through video calls will also be considered.

Enhancement of Consumer Protection Measures

Above all, consumer protection measures will be enhanced at each stage of insurance contracts, including product development, insurance subscription, and insurance payment, to increase consumer trust and satisfaction in the insurance industry. For example, for foreign currency insurance, which has recently seen a rapid increase in sales, on-site inspections and model regulations will be prepared to prevent consumer damage caused by incomplete sales.

In addition, sales responsibility will be strengthened to establish a sound solicitation order for independent insurance agencies (GA). The hidden insurance money inquiry system will also be improved.

The Financial Services Commission will also work to strengthen social safety net functions. It will revise the insurance business supervision regulations in the first half of the year and launch the 4th generation real loss medical insurance in July to enhance the fairness and sustainability of premiums for real loss medical insurance. To solve the problem of continuous increase in automobile insurance premiums due to excessive medical treatment, the compensation system for treatment costs of minor injury patients (injury grades 12-14) will also be improved.

Preparation of ESG Policy Incentives

Furthermore, insurance products suitable for the aging era will be expanded, and risk protection for socially vulnerable groups such as essential workers (delivery, substitute drivers, etc.) and small business owners will be enhanced.

To ensure the smooth implementation of IFRS17 in 2023, the impact on accounting and financial soundness will be checked, and laws and regulations will be revised to fit the new accounting standards and changed management environment.

Policy incentives will be prepared to support ESG management of insurance companies. Through the operation of a task force (TF) to improve management performance evaluations, ESG management and investment evaluation criteria will be established, and related standards will be finalized after pilot operation.

A Financial Services Commission official said, "This policy direction was prepared by synthesizing various opinions collected from stakeholders and experts through the Financial Development Deliberation Committee, Digital Finance Council, Insurance Industry Competition Evaluation, Insurance Sector Expert Council, Sales Channel Advancement TF, and field communication, as well as development direction proposals from specialized research institutions such as the Korea Insurance Research Institute and the Financial Research Institute, and academia." He added, "Detailed implementation plans (four major strategies, twelve core tasks, etc.) will be concretized through TF formation, research projects, and public hearings."