Seven Amendments to the Insurance Business Act Already... 'Half Hopeful' for Long-Standing Issues Solved, 'Half Concerned' About Stricter Regulations

[Asia Economy Reporter Oh Hyung-gil] "This National Assembly is a golden opportunity to amend the Insurance Business Act."

Following the opening of the 21st National Assembly, the political circle is pushing to revise the Insurance Business Act again, drawing close attention from the industry. With the ruling party holding a majority, there is hope that long-standing issues such as simplifying claims for indemnity insurance can be resolved, but some bills that do not fit current realities have also been proposed, causing heightened tension. There are also concerns that attempts to strengthen regulations on certain insurance companies as part of chaebol reform will intensify.

According to the National Assembly Legislative Information System on the 19th, a total of seven amendment bills to the Insurance Business Act have been proposed since the start of the 21st National Assembly session. On the 10th, Representative Yoo Dong-su of the Democratic Party of Korea submitted a bill aimed at easing capital requirements for small-amount, short-term specialized insurance companies.

This bill seeks to improve the difficulty for new entrants by requiring the same level of capital as general insurance companies even when selling only low-risk insurance such as small-scale or short-term insurance. Reflecting the recent popularity of "mini insurance," which offers necessary coverage at affordable premiums, the bill intends to introduce the small-amount, short-term insurance business.

Representative Park Yong-jin of the same party has proposed a total of five amendment bills. Notably, one bill that requires insurance companies to evaluate stocks or bonds of specific companies they hold at market value and sell any stocks exceeding 3% of total assets is seen as targeting Samsung. If applied, only Samsung Life Insurance and Samsung Fire & Marine Insurance would actually need to sell shares.

Currently, the Insurance Business Act restricts insurance companies from holding more than 3% of stocks in a specific company. This is to limit affiliate shareholdings because investment losses by insurance companies could be passed on to customers.

However, the current law bases this limit on the "acquisition cost." The amendment proposes changing the basis to the value on financial statements, including total assets, equity capital, bonds, and stock ownership combined.

As of the end of the first quarter, Samsung Life Insurance holds 8.51% of Samsung Electronics common stock. If evaluated at market value instead of acquisition cost, it could exceed 3% of total assets, requiring partial disposal. Samsung Fire & Marine Insurance also holds 1.49% of Samsung Electronics shares.

The amendment to the Insurance Business Act changes the calculation standard for investment limits on affiliate bonds and stocks from acquisition cost to fair value. Representative Lee Yong-woo of the Democratic Party also introduced a similar bill on the 18th.

Representative Park also proposed amendments to establish general outsourcing regulations for insurance companies, prohibiting re-outsourcing of entrusted tasks, and to prevent unfair practices during claims adjustment outsourcing, imposing fines for violations.

Park said, "These bills were collectively reintroduced after being automatically discarded due to term expiration in the 20th National Assembly," adding, "We will ensure their passage to achieve chaebol reform, economic democratization, and fair economy."

Another bill expanding employment insurance coverage to special employment workers such as insurance planners is also one that the insurance industry opposes due to additional cost burdens.

An industry official said, "Financial regulations that failed to pass in the 20th National Assembly due to opposition from the opposition party will be actively discussed in the 21st National Assembly," adding, "With the ruling party’s overwhelming victory and even the chairmanship of the Legislation and Judiciary Committee going to the Democratic Party, there is a real concern that bills burdensome to the insurance industry may pass."

This content was produced with the assistance of AI translation services.