Bancassurance '25% Rule' Still Causes Reverse Discrimination... "Regulatory Reform Needed to Reflect Market Changes"

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[Asia Economy Reporter Seungseop Song] Concerns have been raised that reverse discrimination related to the '25% rule' of bancassurance, a system where insurance products are sold at bank counters, still persists. Accordingly, voices calling for regulatory reforms in response to changes in the market environment are growing louder.

According to Hana Financial Management Research Institute on the 7th, the bancassurance channel, first introduced to the domestic insurance market in 2003, is currently used as one of the major insurance sales channels alongside agents and GA channels. In fact, for savings-type insurance products, which are relatively easy to sell at banks, sales through bancassurance account for well over half of the total sales performance.

However, despite the successful establishment of the bancassurance channel, various regulations surrounding it have been applied without major changes for 17 years since the system was implemented, raising concerns in the market.

Researcher Seunghui Jeong pointed out, "The biggest problem is that whenever the environment surrounding the bancassurance market changes, the broad framework of these regulations is maintained while only some parts are selectively applied according to the situation, leading to continuous issues regarding regulatory fairness."

Researcher Jeong cited the differential application of the bancassurance 25% rule as a representative problem.

Recently, a legal interpretation was issued that applies the bancassurance 25% rule differently to insurance companies with the same major shareholder. Accordingly, two insurance companies with the same major shareholder only need to comply with a combined total of 33%. This applies to Shinhan Financial Group, which owns Shinhan Life and Orange Life, and KB Financial Group, which controls KB Life and Prudential Life.

Researcher Jeong explained, "With the recent additional acquisition of life insurance companies, financial holding companies owning two life insurers can concentrate sales volumes on affiliates suitable for bancassurance," adding, "Before discussing the rationality of the regulation itself, if exceptions are selectively added whenever the market environment changes as it is now, some insurance companies operating within the regulatory framework may fear reverse discrimination."

Restrictions on insurance products and sales personnel were also cited as outdated regulations. In Korea, considering the impact on the insurance industry and opposition from the insurance sector, life insurers are not allowed to sell whole life insurance, and non-life insurers cannot sell automobile insurance. To prevent incomplete sales and protect insurance agents' income, the number of sales personnel is limited to two per branch.

However, the rate of incomplete sales through bancassurance is relatively low. Currently, the incomplete sales rate for the bancassurance channel is about 0.02%, which is better than that of insurance agents (0.13%) and corporate insurance agencies (GA, 0.36%). The industry’s feared mass unemployment of insurance agents has not occurred. On the contrary, the number of registered insurance agents has increased by 70% since 2003, reaching 424,767.

Researcher Jeong advised that regulatory reform itself is necessary rather than selective exceptions based on environmental changes. He said, "Especially as the number of bank branches decreases due to digitalization, online bancassurance, so-called mobile insurance, is likely to expand rather than offline bancassurance," and added, "It is unreasonable that various regulations, including the 25% rule, apply only to the bancassurance channel."

He also said, "More fundamentally, it is time to carefully review and reform the pros and cons of regulatory applications in line with various environmental changes surrounding the bancassurance market."

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