No Exceptions for Large Firms... Major Insurance Company Organizational Restructuring Announced for the New Year (Comprehensive)

Urgent Need for Generational Change in Sales Organizations: "Change to Survive"
Operational Burdens Including Mandatory Employment Insurance for Special Workers

[Asia Economy Reporter Oh Hyung-gil] The insurance industry has been swept up in a wave of intense organizational restructuring and layoffs. As insurance companies embark on large-scale sales organization restructuring targeting next year, workforce reductions are expected to be inevitable.

With the government's push to mandate employment insurance enrollment for special employment types and to cap recruitment commissions at 1200%, regulations related to agents are tightening, leading to expectations that restructuring of low-performing agents will intensify starting next year.

According to the insurance industry on the 30th, Samsung Life Insurance is considering reviving the exclusive insurance agent sales headquarters division, which was eliminated in last year's year-end personnel reshuffle. Although the sales organization was reorganized around regional units, results fell short of expectations, prompting the need for a control tower.

Hanwha Life Insurance is pursuing a plan to separate its sales organization and transfer it to a sales subsidiary. Mirae Asset Life Insurance is also discussing plans to move exclusive agents to a subsidiary insurance agency (GA). In the non-life insurance sector, Hyundai Marine & Fire Insurance has entered discussions to establish a subsidiary GA.

While the aim is to reduce fixed costs by slimming down through separating sales organizations, conflicts between labor and management appear inevitable. Samsung Fire & Marine Insurance is currently experiencing disputes between labor and management over the conversion of indefinite contract workers to different job categories.

An executive from a life insurance company expressed concern, saying, "Most insurance companies are seriously considering restructuring their existing sales organizations," adding, "There is a growing sense of crisis that it is no longer possible to survive using the same methods."

The "Tripartite Agreement Ceremony for Overcoming the COVID-19 Crisis," which was scheduled to be held on the 1st at the Prime Minister's Official Residence in Jongno-gu, Seoul, was canceled due to the last-minute absence of the Korean Confederation of Trade Unions (KCTU). The tripartite parties had originally planned to sign an agreement that included strengthening employment retention and introducing nationwide employment insurance. The KCTU held a Central Executive Committee meeting from the morning to discuss whether to sign the agreement but ultimately decided not to participate in the ceremony. The photo shows the attendees, excluding Kim Myung-hwan, the KCTU chairman, heading to the reception room on that day. Photo by Kim Hyun-min kimhyun81@

Insurance 'Separation of Manufacturing and Sales' Surfaces... Agent Restructuring Foreseen

Insurance companies are restructuring by converting exclusive sales organizations into subsidiary corporate agencies (GA).

This is interpreted as a measure to reduce costs and to separate insurance 'manufacturing and sales.' With changes in sales organizations coinciding with the mandatory employment insurance enrollment for special employment types, large-scale restructuring targeting low-profit and low-efficiency insurance agents is expected.

So far, insurance companies that have introduced subsidiary GAs include Samsung Life Insurance (Samsung Life Financial Services), Samsung Fire & Marine Insurance (Samsung Fire Financial Services), Hanwha Life Insurance (Hanwha Life, Hanwha Financial Asset), Shinhan Life Insurance (Shinhan Financial Plus), Mirae Asset Life Insurance (Mirae Asset Financial Services), DB Insurance (DB MnS, DB Financial Services), MetLife Life Insurance (MetLife Financial Services), ABL Life Insurance (ABA Financial Services), and LINA Life Insurance (LINA Life Financial Services). When insurance manufacturing and sales are separated, insurance companies no longer need to maintain sales organizations or agent personnel, nor do they need to directly enter into agency contracts with insurance agents.

Previously, the Financial Services Commission proposed the introduction of financial product sales specialists in 2008 and submitted a bill to amend the Insurance Business Act, but it was rejected. The proposal aimed to recognize GAs as financial companies, acknowledging their sales expertise while imposing corresponding responsibilities. The amendment was rejected due to concerns over mass restructuring of insurance company-affiliated agents.

However, the mandatory employment insurance enrollment for special employment types continues to increase the burden of managing large-scale personnel. The government has submitted a bill to the National Assembly to automatically apply employment insurance to special employment types, aiming for passage within the year. The insurance industry demands the introduction of voluntary or optional enrollment methods, reflecting the fact that voluntary turnover accounts for 90% of this workforce.

Nevertheless, if mandatory enrollment is implemented, a plan requiring agents and employers to share insurance premiums equally is likely, raising market concerns that job losses among low-performing agents are inevitable. Furthermore, confusion may deepen as regular employees such as branch managers and general affairs staff who manage agents may also face conversion to commissioned positions.

Starting next year, insurance recruitment commissions will be capped at 1200% in the first year, and a commission restructuring encouraging installment payments will be applied. Although the total commissions paid to insurance agents remain the same, bonuses for new contracts will decrease and be paid over several years.

From the insurance companies' perspective, excessive expenditures can be reduced, but GAs will inevitably see a decline in sales. GAs unable to sustain existing organizational operations due to reduced sales will face survival challenges. Affiliated agents may either change jobs or lose their positions.

The aging workforce structure in insurance companies is also a problem. The average tenure of about 4,000 employees at Hanwha Life Insurance is 17.9 years, and it is expected that within the next five years, one-fifth of all employees will be subject to wage peak systems. Samsung Life Insurance's average tenure is 15.4 years, comparable to or higher than that of banks (Kookmin Bank 16 years, Shinhan Bank 15 years).

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