By Yoon Ja-young
Staff Reporter
Insurance companies and banks are preparing for a new round of battles over bancassurance at the National Assembly. A number of lawmakers supporting insurers handed in a revision bill of the Insurance Industry Act to nullify the expansion of bancassurance scheduled for April next year.
According to the bancassurance expansion plan, banks will be allowed to sell not only the savings type insurance that they do now but also non-savings-linked insurance such as whole-life insurance or critical illness insurance products and auto insurance.
The insurance industry, however, has started an all-out war to stop the expansion plan. Bancassurance was introduced in 2003, aiming at a triple-win of enhancing consumer convenience, boosting insurance sales and creating a new income source for banks. The fruit, however, wasn't distributed equally. While bancassurance commissions have become an important income source for banks, now making up 12.2 percent of their income, insurers complain that up to 88,000 insurance salespeople and agents will lose their job once banks start to sell more insurance products.
The revision bill, handed in by lawmaker Ahn Taek-soo of the main opposition Grand National Party and other lawmakers last week, excludes auto insurance, whole-life insurance and critical illness insurance in the sales list of banks, keeping it at the current level.
Insurers also point out that banks are forcing their customers to subscribe to insurance products in return for extending loans. According to a survey, 22 percent of policy buyers at banks signed contracts in return for loans. Banks are not abiding by regulations on sales procedures, not offering customers multiple products to choose from nor making subscribers fully understand insurance clauses, the insurance associations said. They fear that such practices would spread a negative impression about insurance.
``Consumers will be damaged if the auto insurance and non-savings type insurance products, which require advice from professionals, are sold through other non-insurance financial institutions,'' lawmaker Ahn said. Ahn's revision bill levies up to 100 million won penalty on banks that force customers to subscribe to insurance policies. He added that the insurance salespeople and agencies are expected to lose their jobs.
Banks, however, aren't likely to give up the bancassurance business, which has become an important income source amid stagnant profitability. The financial regulator also has said that it will continue with bancassurance expansion as was planned three years ago.