The financial authorities are contemplating a course of action following the failure to sell MG Insurance, while the voices of subscribers urging for contract transfers are increasing. Contract transfer is a method whereby MG Insurance hands over its contracts to other non-life insurers, and MG Insurance goes bankrupt. It is considered the option that causes the least damage to subscribers as it allows existing contract terms to be maintained. However, insurers that should take over the contracts are expressing reluctance to shoulder the loss contracts, deepening the financial authorities' concerns.
On the 16th, according to the insurance industry, MG Insurance subscribers plan to hold rallies in front of the Financial Services Commission in Jongno-gu, Seoul, in the morning, and in front of MG Insurance's headquarters in Gangnam, Seoul, in the afternoon, demanding to minimize subscriber damage.
Separately from the rallies, subscribers are also proceeding with a national consent petition in the National Assembly. The petition titled "Compensation for subscribers due to liquidation and bankruptcy of MG Insurance" has received agreement from 24,147 people as of the day before at 2 p.m. If the national consent petition obtains 50,000 agreements within 30 days, the related committee will review whether to present it to the plenary session.
The petitioner noted, "The MG Insurance union has shown an irresponsible attitude, stating that if employment succession does not take place, it is better for the company to be liquidated and go bankrupt," and requested that "strong measures be taken to minimize subscriber damage."
The damage minimization plan desired by subscribers is contract transfer. This involves transferring contracts held by MG Insurance to another insurer, which allows for the maintenance of existing contract terms regarding premiums and coverage benefits. On the other hand, liquidation and bankruptcy would compensate subscribers up to 50 million won under the Depositor Protection Act and forcibly terminate contracts before proceeding with MG Insurance's bankruptcy.
The reason the financial authorities are considering contract transfer is that there are 11,470 contract holders (175.6 billion won) who would not be protected under the Depositor Protection Act in the case of liquidation and bankruptcy. Moreover, compensation under the Depositor Protection Act is paid based on the refund value, so even if compensation is received, it is likely to be an unreasonably small amount compared to the premiums paid so far.
The problem is that major non-life insurers that are likely to acquire MG Insurance contracts are not happy about it. Contract transfer requires a decision from the financial authorities, but it is essentially recommending the insurers to take over the contracts. There are no regulations or systems in place that can enforce contract transfers.
Major insurers believe they would likely incur losses if they take over contracts from the poorly managed MG Insurance. Premiums are determined by net premiums, which are the resources for paying out insurance in the event of an incident, and expense premiums required for the insurer to operate. Typically, larger insurers with higher recognition have more expensive premiums. Many customers choose stable and reputable large insurers, even if it means paying higher premiums.
For this reason, the financial authorities are considering reduced contract transfers. This is a method of changing the contract terms to decrease the size of the insurance payouts that subscribers will receive, thus enabling a major insurer to take over. It is seen as a way to mitigate subscriber damage while avoiding criticism of government finance that effectively forces a contract transfer.
In the insurance industry, there are various stakeholders, including agents, insurers, and labor unions, surrounding the handling of MG Insurance, but it is expected that the financial authorities are likely to choose a solution to minimize subscriber damage. An industry official stated, "The insurer that takes over the contracts cannot only bring in the profitable ones, so there is a high possibility of incurring losses."