Freeing up
Bancassurance Plan
- Gov't-ruling Uri Party meeting decides to soften 2nd stage plan to ease impact

The government and ruling party held a meeting Feb.17 on the implementation of the 2nd stage of bancassurance plan. Deputy Prime Minister and Finance and Economy Minister Lee Hun-jai and Yoon Jeung-hyun, chairman of the Financial Supervisory Commission, for the government and Rep. Kang Bong-kyun, deputy Chief Policymaker, for the party, agreed to ease the original plan substantially with the delay in its implementation step-by-step.
The revision in the implementation of the 2nd stage plan was based on the results of the 1st stage implementation plan. The meeting agreed that the financial institutions were unfair in their marketing efforts and the implementation of the 2nd stage plan without revising some of its key items would harm the sound growth of both financial and insurance industries, especially the business of insurance salesmen and the financial market.
The revision include: First. The 2nd stage plan will be implemented step-by-step until April of 2008 with the insurance products to be sold by financial institutions from April this year. Accordingly, from April, guarantee nature products will be included in the bancassurance packages, followed by repayment-type products from October, next year and other remaining products from April, 2008.
They also agreed that the 3rd stage plan of bancassurance, which mainly deal with insurance products for business firms will be put off from the implementation date set for April, 2007. The plan's implementation date will be further discussed.
Second. They agreed to push to improve the bancassurance system for implementation to correct various shortcomings that came up during the first stage of implementation. They agreed to limit the market share of an insurance firm affiliated with a bank to 25 percent from 49 percent of an insurance product. In order to prevent the reduction of the business for insurance salesmen, they agreed to provide an additional insurance product(profit-accruing insurance product) to handle, while the restriction on banks to hire additional insurance planners has been eased to more than two. They also agreed draw up a standard cooperation contract between banks and insurance firms in order to prevent problems. In an effort to prevent damage to consumers due to incomplete sales, banks would be required to explain the details of insurance product when selling it and the financial authorities will strengthen its supervision over the sale of bancassurance products.
The implementation measures discussed at the meeting will be put into practice from next month following the revisions of the implementation decrees of the Insurance Business Law and other related acts.
In the life insurance sector,from next month, guarantee-type insurance products of the three kinds of insurance products including sickness, damage and caring for illness will be allowed to be sold by banks. Only 6.6 percent of 45.5 percent originally scheduled to be sold at banks will go on sale from next month.
In the non-life insurance sector, only guarantee-type products will be allowed to be sold by banks. Only 9.2 percent of 59.4 percent of those products to be handled by banks will be allowed next month. From October next year, in the life insurance sector, repayment-type products out of the three major products will be allowed to be handled by banks.
In the non-life sector, repayment-type products will be allowed to be handled by banks. Only 18.4 percent of the products out of 59.4 percent originally intended to be liberalized will be provided to banks to handle.
From April, 2008, general individual guarantee-type insurance products will be allowed to be sold by banks. Only 25.6 percent of 45.5 percent originally intended to be opened to banks will be provided to banks to handle.
In the non-life insurance sector, long-term guarantee-type products will be allowed to banks to handle. Only 31.8 percent of 59.4 percent will be provided to banks.
The Korea Life Insurance Association has no official comments to make for the delay of the 2nd stage bancassurance plan in three stages as some member firms welcome the government move, while others are opposed to it.
Choi Sung-im, deputy manager of the public relations department of the association, said those member firms opposed to the delay are ready to pursue the bancassurance plan as planned; Some of them have already set up independent affiliates to undertake the business, the deputy manager said.
Those who welcome the move are obviously afraid to compete with banks in selling insurance products. They claimed that their insurance salesmen have been hurt due to the loss of business to banks, which have vast sales network.
Samsung Life Insurance Co. feels its fortunate that the plan has been eased and put into practice in three stages instead of all at once as originally designed. Lee Soon-chol, section head of the company's public relations department, said the original plan contained various provisions that would have undermined the operations of many life insurance firms. It would take loads off of many life insurance firms as it would be implemented in three stages until April, 2008, although the original plan called for the implementation of the plan from April, 2005.
Samsung Fire and Marine Insurance Co. also welcomes the government move to implement the 2nd stage bancassurance plan in three stages until April, 2008. Yoo Hee-jong, section head of the company's public relations department, said it would not be as hard on member firms as the original plan would have because the plan would not be implemented all at once. He said the revised plan would start with guarantee-type insurance products first from next month easing pressure on insurance sales force, not having to compete with banks over all insurance products. nw