Insurance Firms Allowed to Become Holding Companies
By Yoon Ja-young
Staff Reporter
The insurance industry is expected to see a big bang with the revision of the Insurance Business Act announced Thursday.
The Ministry of Finance and Economy announced a revision of the act, which would allow insurance companies to provide payment and settlement services just like banks and securities companies. The revised bill will get parliamentary approval in the first half of next year and go into effect from February 2009. Customers can pay insurance premiums, receive insurance money, or pay utilities bills through their insurance accounts.
The revision goes hand in hand with the Capital Market Consolidation Act, which aims to demolish the walls between various financial industries. With the implementation of the act in 2009, insurers will be competing on a level playing field with banks and securities companies.
The ministry also plans to ease regulation on non-bank financial holdings companies. The measure will help insurance companies expand and turn into holding companies, as they will not have to sell off shares in non-financial companies while adopting a holding company system. Analysts estimate the measure will open ways for local insurers to grow into global insurance holdings companies like ING.
The revision, however, does not allow insurance companies to concurrently operate life insurance and non-life insurance business. The ministry said it does not suit global standards. Non-life insurance companies also have been opposing it.
Insurers will also provide total financial services to customers. Customers can get investment advice or have insurers manage their assets, as wrap account products, currently sold by securities companies, will also be sold by insurance companies.
Bancassurance will be expanded from next April as scheduled despite opposition from large local insurers. They have fiercely opposed the expansion plan, citing massive unemployment of insurance salespeople and irregular sales practices by banks.
A number of surveys have shown that some banks force those who seek loans into subscribing to insurance policies in return. The revision, however, banned selling insurance to those seeking loans from banks.
Insurance-like products sold by the post office and the National Agricultural Cooperative Federation will also be subject to the Insurance Business Act.
The announcement pushed up insurance shares in the stock market. Insurance stocks rose 1.58 percent Thursday.