Prudential's downsizing of branches raises concern

By Lee Min-hyung

Prudential Life Insurance Company of Korea is on track to close branches after it was recently acquired by KB Financial Group, which critics predict will bring a strong backlash from its life planner employees.

As of October, the life insurer operated 76 sales offices nationwide, but the company decided to cut the numbers to 63 by closing offices with low sales.

This is interpreted as a move to realign its business structure to improve the firm's sales efficiency after KB took over the company. In early September, the nation's largest financial holding firm by market capitalization incorporated the Korean subsidiary of the multinational insurer into its life insurance arm.

Of the biggest concerns is potential backlash from insurance planners working for the insurer. Those belonging to branches that will be closed down will likely be forced to move to other insurance firms.

This is even more serious in consideration of Prudential Life's quality planner organization. One of the competitive edges the company has compared to other life insurers is its sales strategy targeting affluent customers.

A Prudential Life spokesperson said its decision to cut the number of sales offices came as part of its move to become a more efficient business.

“For the past few years, we have increased the number of life planners, and the number of branches was also on the rise,” the official from the company said. But the company decided not to hire more planners this year, so the number of branches will be slashed in line with the firm's management efficiency measure, the official said.

Almost a half of its sales offices are located in the affluent district of Gangnam. KB also acquired Prudential Life based on high ratings of the insurer's exceptional management strategy focusing on the rich and their close connection with the company's life planners.

KB Financial Group's CFO Kim Ki-hwan also shared KB's vision of generating synergies between the quality planners and KB's various financial services. For greater synergy, KB pledged to operate Prudential Life, independently, without integrating it with the group's life insurance subsidiary, KB Life Insurance.

As KB Life is a second-tier life insurer, KB is also considering an option to merge the two life insurers and launch a bigger and more influential life insurer. But KB underlined it has no immediate plans to launch such an integrated entity as of October this year, because it hopes to take full advantage of the premium image of Prudential Life by running the two firms both separately and independently.

“We are going to run Prudential Life independently without merging it with KB Life for Prudential to settle in the group and continue to operate its business stably,” Kim said in a recent regulatory filing. “KB is going to push for a premium strategy with the quality life planners of Prudential.”

KB Financial plans to integrate Prudential Life and KB Life sometime as early as 2022, so KB is advised to present detailed plans to shy away from any internal backlash from Prudential.

“Even if KB continues to pledge not to harm Prudential's strong brand identity, the concern remains in place among Prudential's planners,” an insurance industry source said. “Minimizing their complaints should be a top priority for KB to continue generating synergy even after the upcoming integration of the two life insurance arms.”