What’s Behind Insurance Companies Establishing GA Subsidiaries... Cracks Emerging Everywhere

The Federation of Office and Financial Workers' Unions held a press conference on the 29th of last month in front of the Financial Services Commission in Gwanghwamun, Seoul, criticizing the indiscriminate establishment of subsidiaries by insurance companies for causing employment insecurity among employees. (Photo by the Federation of Office and Financial Workers' Unions)

[Asia Economy Reporter Changhwan Lee] As insurance companies actively promote the separation of sales organizations from their headquarters (separation of sales and production), conflicts with employees opposing this move are intensifying. It has become controversial as some unreasonable incidents have occurred during the separation process.

According to the insurance industry on the 14th, Heungkuk Life Insurance, LINA Life Insurance, and ACE Insurance are currently promoting the separation of sales and production.

The separation of sales and production in insurance companies is carried out by separating the sales organization from the headquarters and establishing it as a subsidiary. A representative example is the establishment of a subsidiary-type GA (corporate insurance agency), and sometimes only the telemarketing (TM) organization is separated to create a TM-specialized company.

Previously, Hanwha Life, Mirae Asset Life, Tongyang Life, Prudential Life, and Shinhan Life separated their organizations in this way.

Insurance companies believe that the separation of sales and production can enhance the expertise of each organization. They also see preventing excessive sales competition, cost reduction, and active response to financial regulations as positive functions of the separation.

In fact, insurance companies in advanced countries such as the United States and Europe mainly focus on product design and entrust sales to specialized companies, which is called an advanced country-type system.

However, conflicts related to employment security of sales personnel and telemarketers who move to subsidiaries arise during the separation process, and various issues such as raising funds for establishing subsidiaries are also emerging.

In the case of Heungkuk Life Insurance, which is planning to establish a subsidiary GA early next year, it was reported that employees were burdened with costs such as purchasing pens and dining expenses to raise funds, causing controversy.

On the 11th, Rep. Choi Seung-jae of the People Power Party revealed at the National Assembly’s Financial Supervisory Service audit by the Financial Services Committee that Heungkuk Life distributed promotional pens to affiliated insurance planners and later deducted the cost of the pens from their salaries.

It was also reported that affiliated insurance planners were made to attend company dinners, and the meal costs were divided by the number of attendees and reflected in their salaries, as well as promotional rubber gloves and sanitary vinyl costs being deducted from salaries.

Rep. Choi claimed that Heungkuk Life was engaging in unfair practices toward affiliated planners because it needed cash to establish the GA subsidiary. In response, Lee Bok-hyun, Governor of the Financial Supervisory Service, said he would look into Heungkuk Life’s abuse of power.

Conflicts related to employment insecurity are also ongoing. On the 29th of last month, the Federation of Financial and Service Workers’ Unions held a press conference in front of the Financial Services Commission in Gwanghwamun, Seoul, criticizing the reckless establishment of subsidiaries by insurance companies for causing employment insecurity among employees.

Lee Jae-jin, chairman of the Federation of Financial and Service Workers’ Unions, said, "Starting with Hanwha Life and Mirae Asset Life in 2021, insurance companies such as Tongyang Life and Prudential Life began separating sales and production," adding, "Although it is under the pretext of enhancing insurance expertise and competitiveness, in reality, it is to avoid the burden of employment insurance premiums for exclusive planners, avoid risks due to the implementation of the Financial Consumer Protection Act, and carry out restructuring."

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