By Lee Yeon-woo | The Korea Times | April 6, 2024
Samsung Fire & Marine Insurance has stopped offering bancassurance services, after operating in the field for 21 years.
Bancassurance is a collaboration between a bank and an insurance company where the lender acts as a distribution channel for the insurer’s products.
According to industry officials, Samsung Fire & Marine Insurance, a leading player in the non-life insurance sector, said it halted new sales of its long-term insurance products through banks starting on April 1.
However, the insurer intends to uphold its agreements with banks and will continue to oversee the products that have already been sold. Additionally, it aims to explore sales opportunities in international markets, such as Vietnam, while observing industry developments.
Pension and other savings-based insurance policies account for over 70 percent of all sales through the bancassurance channel. However, the introduction of the new International Financial Reporting Standard (IFRS) 17 has reduced their prevalence. IFRS17 encourages insurance companies to prioritize selling protection-based insurance over savings-based ones. This shift enhances the service margin, a key indicator of profitability. As a result, the appeal of bancassurance, which relies heavily on savings-based insurance products and involves paying commissions to banks, is waning.
Meritz Fire & Marine Insurance and Heungkuk Fire & Marine Insurance have already stopped offering bancassurance services.
Despite this trend, other companies, such as Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance, continue to offer the service. However, their commitment is marked by growing internal discussions, indicating possible reconsiderations of their positions.
According to the Financial Supervisory Service, Korean non-life insurers have seen their income from bancassurance fall 15 percent from 6.2 trillion won ($4.5 billion) in 2018.
As a growing number of non-life insurers pull out of bancassurance, banks are facing growing challenges in adhering to existing regulations. These rules limit the sale of any single insurer’s products to no more than 25 percent of a bank’s total insurance sales. The regulation aims to prevent banks from preferentially promoting the products of insurance companies affiliated with their own financial group, ensuring a more competitive and fair market.