Big Tech and Fintech Allowed to Register as Insurance Agencies
People Power Party Proposes Amendment to Insurance Business Act
[Asia Economy Reporter Oh Hyung-gil] Legal amendments are once again being pursued to allow big tech companies like Naver, as well as online shopping malls and fintech firms, to register as insurance agencies (GA).
Although online platform companies are accelerating their entry into the financial industry, direct entry into the insurance sector has been difficult due to high entry barriers such as sales regulations.
The insurance industry is wary of the emergence of strong competitors. There are concerns that the appearance of various sales channels could lead to incomplete insurance sales, which would be detrimental to consumer protection.
According to the insurance industry on the 6th, Representative Seong Il-jong of the People Power Party submitted a bill to amend the Insurance Business Act on the 4th, which includes provisions allowing electronic financial operators to register as insurance agencies (GA).
Under the current Insurance Business Act, institutions eligible to register as GAs are limited to financial institutions such as banks, investment brokers, and mutual savings banks.
Because of this, IT companies have had to take a detour by establishing new corporations to register as GAs. When agency registration is restricted, they recruit insurance indirectly through subsidiaries or provide limited services in the form of advertisements. A representative example is Naver Financial’s establishment of the insurance specialist corporation ‘NF Insurance Service’ in July last year to start insurance services.
Representative Seong said, "As non-face-to-face transactions become more active, limiting insurance agencies to financial institutions falls behind the changes in the consumer market in the COVID era," adding, "Reflecting insurance consumers’ preference for non-face-to-face transactions, insurance sales should also be allowed to telecommunication sales operators licensed for electronic financial business."
As of the end of April, there are 162 companies registered as electronic financial operators. They include online shopping companies and payment agencies such as Naver Financial, Kakao, T-money, Woowa Brothers, Bank Salad, and Viva Republica (Toss). If GA registration regulations are relaxed for them, new business opportunities are expected to be created.
Insurance Industry Voices Concerns Over Non-Face-to-Face Incomplete Sales
In the 18th and 19th National Assemblies, bills to allow electronic financial operators to register as insurance agencies were proposed but all failed to pass. However, the atmosphere is different this year. The financial authorities are also pushing for measures to allow various digital recruitment methods.
The Financial Services Commission is reviewing institutional improvements to allow platform operators such as electronic financial operators and MyData businesses to register as insurance agencies. They also plan to improve regulations unsuitable for platform operators, such as the requirement that at least 10% of GA employees maintain insurance planner qualifications.
The insurance industry is visibly tense about platform operators entering the insurance market.
Kakao Pay acquired the insurance brokerage startup Inviyu in 2019. Especially, Kakao Pay is currently undergoing formal licensing procedures after applying for preliminary approval to establish a digital non-life insurance company earlier this year. However, the preliminary approval review period has exceeded four months, causing delays. The financial platform Toss is also expanding its influence by launching the insurance planner-exclusive sales support application Toss Insurance Partner.
The insurance industry is concerned that insurance recruitment conducted digitally could lead to incomplete sales.
There are concerns that complaints may increase due to insufficient product explanations during the purely non-face-to-face sales of complex products that consumers find difficult to understand. There is also a sense of crisis that, as with the emergence of large GAs, platform operators’ growing influence could lead to insurance companies becoming dependent on them.
An insurance company official said, "It is not easy to impose responsibility afterward, as discussions on strengthening GA’s sales responsibility to improve insurance recruitment order have been ongoing for years," adding, "Just as the Financial Consumer Protection Act has strengthened sales responsibility for incomplete sales, the same regulations should be applied to platform operators."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
