[Column] Mandatory Employment Insurance Opposed Even by Those Affected... Who Is It For?

Mandatory Employment Insurance for Special Workers
Insurance Industry in Panic over Legislative Push within the Year

Oh Hyung-gil, Political Economy Department Reporter

[Asia Economy Reporter Oh Hyung-gil] As the government begins full-scale efforts to introduce a nationwide employment insurance system by 2025, the insurance industry has fallen into panic. The Ministry of Employment and Labor, which announced the legislative notice of the amendment to the Employment Insurance Act for applying employment insurance to special-type workers (teuksoohyeong geunro jongsaja, teukgo) on the 8th, also revealed plans to push for legislation within this year.

Strengthening the employment safety net is a key task of the Moon Jae-in administration. Although it is an issue that requires social discussion as a prerequisite, the COVID-19 pandemic has ignited the urgency. Establishing nationwide employment insurance like health insurance has emerged as a post-COVID challenge.

However, there was strong dissatisfaction over the unilateral announcement without social consensus. Startled, the Ministry of Employment and Labor suddenly convened insurance association officials and planners on the 23rd of this month, citing the need to hear opinions.

The planners strongly demanded to be excluded from the coverage, considering that they are essentially self-employed business operators. Ultimately, the meeting ended confirming that the government and the industry have significant differences in stance. One attendee lamented, "The government said it would reflect the industry's opinions, but it was nothing more than a 'formality.'"

The planners' outcry is fully understandable. Since the COVID-19 crisis, the atmosphere in the insurance sales field has been akin to a temporary closure. Insurance companies have even provided livelihood stabilization funds to planners whose commission income has decreased. This situation could lead to calls for mandatory employment insurance for planners to strengthen the employment safety net emphasized by the Moon Jae-in administration. However, this is a view disconnected from reality.

In a 2017 survey conducted by the Korea Insurance Research Institute targeting planners, only 16.5% supported mandatory enrollment in employment insurance. This means more than 8 out of 10 opposed it. A 2013 Ministry of Employment and Labor survey also showed that 77% believed only those who want to should enroll.

A considerable number of planners feel burdened by increased taxes due to income reporting. High-earning planners have no interest in employment insurance. Frequent voluntary resignations or job changes are also problematic. The one-year retention rate for new planners is only 38.2% in life insurance and 53.3% in non-life insurance. This means that out of 10 new planners, 6 quit after one year.

Insurance companies or General Agencies (GA) will bear the burden of insurance premiums. To reduce costs, they may eventually terminate contracts with underperforming planners. This could accelerate restructuring by hastening the shift to digital-based non-face-to-face sales. Efforts to protect planners from unemployment may ironically push them into unemployment.

Especially, small and medium-sized GAs with weak financial capacity will have no choice but to focus more on profits to pay insurance premiums. The possibility of increased incomplete sales under a "sell first, worry later" approach also rises. The damage will fall squarely on consumers. Mandatory employment insurance that makes planners, insurance companies, GAs, and consumers unhappy?who is it really for?

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