Insurance premium hike not desirable: watchdog chief

Financial Supervisory Service (FSS) Gov. Zhin Woong-seob speaks during a breakfast meeting with heads of 13 foreign insurance companies at the Conrad Seoul hotel on Yeouido, Friday. Right of Zhin is Francois Lecomte, CEO of AXA General Insurance Korea. / Courtesy of FSS

By Nam Hyun-woo

Foreign insurance firms are given greater autonomy and they should be more responsible with it, Financial Supervisory Service (FSS) Gov. Zhin Woong-seob stressed Friday.

“The method of regulations has been changed recently and has increased the autonomy of insurance firms in developing products and determining insurance premiums,” Zhin said during a breakfast meeting with heads of 13 foreign insurance companies operating in Korea held at the Conrad Seoul hotel on Yeouido. “In this circumstance where greater autonomy is allowed, it is very important for insurance companies to recognize the true meaning of autonomy.”

The watchdog announced its Roadmap for Insurance Business Reform last October. The reforms package prohibited financial authorities from intervening in the decision-making of insurance firms in setting up premiums and commissions.

Also, the package allowed insurers to report after developing new products. Previously, rules required insurers to report before starting product development.

The FSS chief said the reforms package is helping insurance firms stimulate innovation and competition between peers by easing regulations, but at the same time underscored insurers to refrain from raising premiums excessively.

“Recovering previous losses through premium hikes is not a desirable management strategy,” Zhin said, adding that insurers should give more efforts in delivering benefits to claimers more quickly and precisely.

Zhin also noted that the implementation of the International Financial Reporting Standards (IFRS) 4 Phase II will have a huge impact on the local industry.

The IFRS 4 Phase II is a new rule, which the government seeks to introduce to Korea by 2020. It will assess insurers' liabilities based on market value, rather than book value. This allows a much “fairer” assessment of insurers' ability to withstand stress, but also forces them to build reserves worth 50 trillion won to cover losses expected down the road.

“If necessary, foreign insurers should cooperate with their headquarters, taking preemptive measures such as capital base expansion,” Zhin said.

The meeting was attended by the heads of AIA Korea, Chubb Korea, MetLife, Tongyang Life, Prudential Life, Asia Capital Re, AIG Korea, AXA Direct, BNP Paribas Cardif General Insurance, Mitsui Sumitomo Insurance Korea, Munich Re Korea and SCOR Korea.