Starting in the second half of this year, insurers must evaluate the incompleteness of sales and contract retention rates for corporate insurance agencies (GA) selling their products, and they are required to report the results to their board of directors. GAs with low evaluation ratings must establish management plans. Super-large GAs with more than 3,000 agents must have at least five in-house compliance officers.
On the 21st, the Financial Services Commission and the Financial Supervisory Service discussed the 'Enhancing Accountability in Insurance Sales Channels' plan aimed at strengthening the management of insurance companies' GA sales agency outsourcing during the sixth insurance reform meeting chaired by Kim So-young, deputy chairman of the Financial Services Commission.
Financial authorities decided to improve regulations to strengthen management due to the ongoing issue of incomplete sales at GAs. First, in the second half of this year, they will establish the 'GA Operational Risk Assessment System' to evaluate the adequacy of risk management for GAs. Insurers must set their own GA selection and evaluation criteria that meet international standards, such as those from the International Association of Insurance Supervisors (IAIS), when selecting outsourced GAs. Insurers will evaluate the retention rates of insurance contracts, the rate of incomplete sales, and the insurers' commission policies for outsourced GAs using a grading system from 1 to 5.
Insurers will assess and evaluate the outsourced work of GAs annually, and those with low evaluation ratings must establish risk management plans for sales outsourcing. The results of the risk assessments must be reported to the board of directors. Insurers with poor evaluation results must set aside additional capital. Insurers will provide evaluation incentives for contracts with GAs that receive excellent or good ratings.
Financial authorities will strengthen the accountability of internal controls within GAs. Large GAs will be required to establish detailed procedures for compliance with internal control standards and measures in case of violations, and they will undergo regular compliance checks.
Minimum staff levels for compliance support organizations will be established based on the size of GAs. Previously defined as 'appropriate numbers,' the compliance support personnel for GAs will now require more than five for super-large GAs with over 3,000 agents, more than three for large GAs with between 1,000 and 3,000 agents, and more than two for GAs with between 500 and 1,000 agents.
To enhance liability capacity, a minimum deposit requirement for GA business guarantees will be established, which previously had no minimum threshold and was therefore less effective. The maximum limit per insurer will be raised to 500 million won from the previous 300 million won.
In the event of liability arising from consumer damage, such as incomplete sales, insurers will significantly strengthen their right to seek compensation from GAs.
Deputy Chairperson Kim So-young noted, 'Contract cancellations due to incomplete sales lead to a lack of trust in the entire insurance industry, and through reinforcing accountability for incomplete sales and establishing internal controls, we must create a sales culture that prioritizes consumers.'