By Kim Rahn, Yi Whan-woo
A group of foreign insurance companies operating in Korea are up in arms over Korean regulators' temporary ban on telemarketing activities by all financial firms here, claiming the measure may violate Korea's free-trade accords.
AIA Life, the Hong Kong-based life insurer, sent a letter of protest to the Financial Services Commission (FSC), while three American insurers ― AIG, Lina and ACE Insurance ― discussed the issue with the American Chamber of Commerce in Korea (AMCHAM).
The protest comes after the authorities Sunday prohibited financial firms' telemarketing through the end of March to prevent any potential use of customer data stolen from three local credit card companies in financial companies' sales. The ban can be extended further depending on the circumstances.
The FSC said Wednesday that the life insurer's headquarters sent a letter to the commission to request retraction of the ban.
"We received the letter on Tuesday. AIA claimed that the regulation will affect its business seriously and asked us to lift it," an FSC official said.
An AIA Life Korea official said about 35 percent of its new contracts are made via telemarketing. "We forecast the ban may cause a significant sales decline," she said.
Heads of the three American insurers also met with officials from AMCHAM on Tuesday. They discussed impacts of the telemarketing ban on not only the three firms but also other foreign insurers.
AMCHAM and the three companies did not elaborate on what they talked about.
The three were among seven insurers exempted from the ban as more than 70 percent of their sales come from telemarketing. But they are also prohibited from operating indirect phone sales channels, such as home shopping, credit card companies or consumer finance service firms, and their sales from these channels also take up a large portion of their total sales.
For AIG, more than 80 percent of its sales come from telemarketing. "And more than 80 percent of our telemarketers work for the indirect channels," an official at AIG said.
At Lina Korea, 2,800 out of its 5,400 telemarketers work for the indirect channel, and sales from those channels account for about 40 percent of the company's total.
"Many foreign insurers here are unhappy with the regulation. We are watching how the situation goes," an official from Lina said.
Regarding the protests, the FSC said the telemarketing business has shrunk since the data leaks as people receiving telemarketers' calls are suspicious if the marketers obtained their phone numbers from the stolen data.
"We think it will eventually help develop the telemarketing industry if the companies suspend the marketing for a while and check their customer data management until public anxiety is relieved. The ban is not legally binding, but we asked financial firms to cooperate and most of them said they will follow," an official at the FSC said.
Regarding a controversy over whether the ban is against the Korea-U.S. free-trade agreement (FTA), he said, "The regulation is applied equally to local and foreign financial firms, so it is not in violation of the FTA."
Local companies are also being hit hard by the telemarketing ban.
"A number of our member companies have been alarmed by the government decision," a spokesman at the General Insurance Association of Korea (GIAK) said. The GIAK is made up of 18 non-life insurance firms.
According to the GIAK, Lotte Insurance earned 70.2 percent of its car insurance premiums, or 235 billion won ($217.8 million), during the January-September period last year from customers recruited through telemarketing.
Among the GIAK members, Heungguk Fire & Marine Insurance ranked second with 64.7 percent during the same period, followed by Dongbu Insurance with 36.7 percent, Hanwha General Insurance with 33.7 percent and Meritz Fire & Marine with 21.9 percent.
The Korea Life Insurance Association (KLIA), a representative group for life insurance issuers, said it is also concerned about the ban on sales over the phone.
Among the 27 KLIA members, KB Life relies the most on telemarketing with its proportion reaching 27.4 percent, followed by Shinhan with 18 percent.
"The government should have considered our sales situation in advance before enhancing its regulation," a KLIA spokesman said.
Insurance firms claim the measure taken by the authorities was too arbitrary.
"It is evident our telemarketers will have to sit idle all of a sudden, and we're seeking for ways to assign other jobs to them," a Dongubu Insurance spokesman said.
Some 1,500 telemarketers work for the firm, according to the GIAK. It said the figure is the highest compared to other non-life insurers, including Lotte Insurance with 1,429.
A group of foreign insurance companies operating in Korea are up in arms over Korean regulators' temporary ban on telemarketing activities by all financial firms here, claiming the measure may violate Korea's free-trade accords.
AIA Life, the Hong Kong-based life insurer, sent a letter of protest to the Financial Services Commission (FSC), while three American insurers ― AIG, Lina and ACE Insurance ― discussed the issue with the American Chamber of Commerce in Korea (AMCHAM).
The protest comes after the authorities Sunday prohibited financial firms' telemarketing through the end of March to prevent any potential use of customer data stolen from three local credit card companies in financial companies' sales. The ban can be extended further depending on the circumstances.
The FSC said Wednesday that the life insurer's headquarters sent a letter to the commission to request retraction of the ban.
"We received the letter on Tuesday. AIA claimed that the regulation will affect its business seriously and asked us to lift it," an FSC official said.
An AIA Life Korea official said about 35 percent of its new contracts are made via telemarketing. "We forecast the ban may cause a significant sales decline," she said.
Heads of the three American insurers also met with officials from AMCHAM on Tuesday. They discussed impacts of the telemarketing ban on not only the three firms but also other foreign insurers.
AMCHAM and the three companies did not elaborate on what they talked about.
The three were among seven insurers exempted from the ban as more than 70 percent of their sales come from telemarketing. But they are also prohibited from operating indirect phone sales channels, such as home shopping, credit card companies or consumer finance service firms, and their sales from these channels also take up a large portion of their total sales.
For AIG, more than 80 percent of its sales come from telemarketing. "And more than 80 percent of our telemarketers work for the indirect channels," an official at AIG said.
At Lina Korea, 2,800 out of its 5,400 telemarketers work for the indirect channel, and sales from those channels account for about 40 percent of the company's total.
"Many foreign insurers here are unhappy with the regulation. We are watching how the situation goes," an official from Lina said.
Regarding the protests, the FSC said the telemarketing business has shrunk since the data leaks as people receiving telemarketers' calls are suspicious if the marketers obtained their phone numbers from the stolen data.
"We think it will eventually help develop the telemarketing industry if the companies suspend the marketing for a while and check their customer data management until public anxiety is relieved. The ban is not legally binding, but we asked financial firms to cooperate and most of them said they will follow," an official at the FSC said.
Regarding a controversy over whether the ban is against the Korea-U.S. free-trade agreement (FTA), he said, "The regulation is applied equally to local and foreign financial firms, so it is not in violation of the FTA."
Local companies are also being hit hard by the telemarketing ban.
"A number of our member companies have been alarmed by the government decision," a spokesman at the General Insurance Association of Korea (GIAK) said. The GIAK is made up of 18 non-life insurance firms.
According to the GIAK, Lotte Insurance earned 70.2 percent of its car insurance premiums, or 235 billion won ($217.8 million), during the January-September period last year from customers recruited through telemarketing.
Among the GIAK members, Heungguk Fire & Marine Insurance ranked second with 64.7 percent during the same period, followed by Dongbu Insurance with 36.7 percent, Hanwha General Insurance with 33.7 percent and Meritz Fire & Marine with 21.9 percent.
The Korea Life Insurance Association (KLIA), a representative group for life insurance issuers, said it is also concerned about the ban on sales over the phone.
Among the 27 KLIA members, KB Life relies the most on telemarketing with its proportion reaching 27.4 percent, followed by Shinhan with 18 percent.
"The government should have considered our sales situation in advance before enhancing its regulation," a KLIA spokesman said.
Insurance firms claim the measure taken by the authorities was too arbitrary.
"It is evident our telemarketers will have to sit idle all of a sudden, and we're seeking for ways to assign other jobs to them," a Dongubu Insurance spokesman said.
Some 1,500 telemarketers work for the firm, according to the GIAK. It said the figure is the highest compared to other non-life insurers, including Lotte Insurance with 1,429.
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