[1mm Financial Talk] Boom in Insurance Company Subsidiary Establishment, Employee Job Insecurity Also Growing

[Asia Economy Reporter Changhwan Lee] As the insurance industry experiences a wave of subsidiary establishment, employment insecurity among workers is also increasing. Establishing subsidiaries allows the headquarters to reduce costs and enjoy the effect of escaping some regulations. However, concerns are rising that the employment stability of employees incorporated into subsidiaries may decline.

According to the insurance industry on the 30th, the Hanwha General Insurance Labor Union held a rally in front of the Hanwha General Insurance headquarters in Yeouido, Seoul, on the afternoon of the 23rd, stating, "We oppose outsourcing the number of cases to Hero Loss Assessment for Hanwha General Insurance's attempt to outsource automobile property damage compensation."

Hero Loss Assessment is a property damage loss assessment corporation jointly established by three non-life insurance companies: Hanwha General Insurance, Carrot General Insurance, and Lotte General Insurance. To strengthen the expertise of the loss assessment business, the three medium-sized non-life insurers plan to concentrate their related capabilities.

The shareholding ratio of Hero Loss Assessment is 49% for Carrot General Insurance, 37% for Hanwha General Insurance, and 14% for Lotte General Insurance. Carrot General Insurance is a subsidiary of Hanwha General Insurance. The inaugural CEO of Hero Loss Assessment has also been appointed as Vice President Lee Eun, a former Hanwha General Insurance executive.

Hanwha General Insurance is currently offering compensation to automobile property damage compensation employees and obtaining transfer consent forms from those who wish to move to Hero Loss Assessment. This indicates preparations to transfer some company operations, not just simple equity participation.

The Hanwha General Insurance labor union is deeply concerned that after the employees' transfer, the company may fully outsource the property damage compensation work, which could cause employment insecurity among the remaining employees.

Labor-management conflicts over employment insecurity due to subsidiary establishment are growing throughout the insurance industry. Major life insurance companies are continuing to establish GA (General Agency) subsidiaries following the trend of separating underwriting and sales organizations. Last year, Hanwha Life and Mirae Asset Life completed the establishment of GA subsidiaries, and this year Prudential Life is promoting the establishment of a GA subsidiary.

Life insurers expect that through GA subsidiaries, they can reduce the size of the headquarters organization to cut costs and sell more insurance products, thereby improving overall profitability. Due to the regulatory nature of the insurance industry, they also aim to reduce the headquarters' risk burden regarding various regulations and violations.

However, controversies continue over the treatment and employment stability of employees who move from the headquarters to subsidiaries. The labor and management of Hanwha Life Financial Services have faced difficulties reaching agreements in both collective bargaining and wage negotiations after establishing the GA subsidiary. Insurance planners affiliated with Hanwha Life have even staged tent sit-ins to actively urge negotiations with management. Mirae Asset Life also experienced labor-management conflicts during the establishment of its GA.

An industry insider said, "Insurance companies can improve performance and mitigate regulatory risks by establishing subsidiaries. However, when employees move from the headquarters to subsidiaries, conflicts inevitably arise as their wages and employment stability are threatened."