Nonghyup in Dispute With Insurance Firms
By Yoon Ja-young
Staff Reporter
The National Agricultural Cooperative Federation, or Nonghyup, is clashing with insurance companies over the insurance market.
Insurance companies are protesting that Nonghyup, which is transforming itself into a financial holding company, is being given undue favors for its insurance business.
The General Insurance Association of Korea said Friday that it had handed in its opinion to the Ministry of Food, Agriculture, Forestry and Fisheries, demanding that Nonghyup be subject to regulations in its insurance business.
The clash was triggered by a revision to the National Agricultural Cooperative Federation Act, according to which, Nonghyup's financial holding company will be established by 2011. The holding company will have a bank and insurance company as subsidiaries.
Nonghyup already has a big slice of the pie in the insurance market. Its total insurance assets stand at 29.3 trillion won, exceeding that of Samsung Fire & Marine Insurance, the biggest non-life insurer in the country. Nonghyup is the fourth largest in the life insurance market.
Currently, however, Nonghyup's insurance business is in the form of mutual aid, where members raise funds to provide each other with insurance money in cases such as those relating to disease or death.
Hence, it has not been subject to the Insurance Business Law, though Nonghyup sold insurance not only to its cooperative members but also to non-members.
Following the revision, however, Nonghyup's insurance business will become an insurance company, which should be subject to regulations just like other insurers.
However, other companies claim that the revision bill gives too many exceptions to Nonghyup.
For one thing, it won't be subject to bancassurance regulation. Currently, the law states that when a bank sells insurance products through bancassurance, the products of one company should not exceed 25 percent of the bank's sales portfolio.
As it was not categorized as an insurance company, and, hence, not subject to the bancassurance regulation, Nonghyup has mostly sold its own insurance products.
The revision bill allows Nonghyup to continue doing that, giving up to a 10-year grace period. Insurance companies say that's too big a favor.
The companies are also opposed to the idea that regional cooperatives are acknowledged as insurance agencies. They say that when Nonghyup, which has nationwide channels, starts selling variable and auto insurance, it could be a severe blow for them.
``This will violate the rights of 400,000 insurance salespeople and agencies to survival,'' CEOs of 22 life insurance companies announced at the emergency meeting they held Tuesday, calling for the elimination of special favors for Nonghyup.
Nonghyup, meanwhile, says it will provide more options for customers and pull down premiums.
However, insurance companies say that the special favors for Nonghyup could go against the free trade agreements that Korea has signed with the United States and E.U.
They say it conflicts with the clause: ``The regulation of insurance services supplied by a sectoral cooperative should not provide the cooperative a competitive advantage over private suppliers of like insurance services.''