New rules handicap small insurers

By Kim Tae-jong

New regulations on telemarketing will threaten the survival of many small and medium-sized insurance firms, such as Tongyang Life, Dongbu Insurance, Shinhan Life, Axa Insurance, Lina and AIA.

Those firms depend a great deal on telemarketing, industry sources said Monday.

The regulation will benefit only major insurance firms, which depend less on telemarketing than their smaller rivals, they said.

These latest regulations are part of measures to protect customers’ personal information from theft and misuse after a series of data breaches at three major credit card companies ― KB Kookmin Card, NH NongHyup Card and Lotte Card ― in January.

Under the regulation that went into effect Tuesday, financial firms are not allowed to call or send text messages and e-mails to customers for the purpose of sales unless they previously agreed to be contacted for such marketing activities.

They are also banned from calling the same customer more than twice a day even if he or she has agreed to participate in telemarketing activities.

But smaller firms are concerned that such regulations will virtually ban telemarketing activities and, consequently, hurt their business.

“The financial regulator has come up with new regulations simply to reassure the public after the massive information leak scandal, but this is hasty and does not consider the regulations’ impacts on the industry,” an official from a foreign life insurance firm said.

“Why should we become victims of the scandal when we are not directly involved in it?”

Although he admitted there is a need for some regulation, he added that the recent moves go against President Park Geun-hye’ pledge to pursue deregulation as part of an effort to boost the economy.

Such regulations will be burdensome especially to already troubled small and medium-sized insurance companies.

Previously, they were ordered to suspend telemarketing activities for a month to address concerns about any potential abuse of stolen customer data, but they still had to pay their telemarketers’ wages during that period.

Telemarketing is a major sales method for smaller insurers as they have a limited number of salespeople.

According to the General Insurance Association of Korea and the Korea Life Insurance Association, most small insurance firms make over 50 percent of their sales through telemarketing, while big insurance firms such as Samsung, Kyobo and Hanhwa earn less than 10 percent of their premiums from the method.

For example, Lotte Insurance earned 70.2 percent or 235 billion won of its car insurance premiums during the January–September period last year from customers recruited through telemarketing.

In this regard, many industry insiders also argued that the regulations on telemarketing will benefit only major insurance firms and further increase their dominance of the market.

Officials from insurance firms also voiced concerns that these latest series of measures will also create a negative perception about telemarketing.

“The regulations have already caused troubles as people started to develop a very negative perception of all telemarketing activities, even though we have taken the necessary legal steps,” an official from another insurer said. “Such hasty measures simply hurt our business.”