Hello guys. Long time no see. Today I will talk about the regulation on quasi-insurance system. Quasi-insurance refers to an insurance sold by ordinary companies not by insurance companies. For example it is sold by post offices and mutual aid associations like the Credit Co-operative Association, the National Federation of Fisheries Cooperatives, and Saemaeul Finance firm. Then, why does the government intends to reform regulations on quasi-insurance system?
The biggest reason is that different regulations are applied on similar insurance products. Although the quasi-insurance is similar or same with the insurance sold by an insurance company in contents, the government applies loose regulation on the quasi-insurance and it can cause unfair competition between insurance company and non-insurance company. Also the need for consumer protection is one of the reasons of this reform.
This improvement largely consists of two parts. First of all, the government will regulate post offices and mutual aid associations in the same level with insurance company. Let’s look into the contents more in detail. There is saying that “When one´s home is harmonious, all goes well”. So, the regulation starts from inside. For the reinforcement of internal control, the process and standard of work will be made and the appointment and dismissal of law-abiding officer will be compulsory. Furthermore, as the means of the minimum standard reserve, RBC(Risk Based Capital) will be introduced and for the accurate computation of premium, CFP(Cash Flow Pricing) system will be applied.
In addition to these kinds of internal controls, the government will regulate external parts too. First, the associations have to obey stated matters in basic document and receive external verification about basic document. Regarding sales of insurance, the same level of regulation with the insurance company will be introduced. In this part, the qualifications of insurance solicitor and the process of recruitment are included.
Secondly, there has been a need of supervision over the soundness of quasi-insurance company. In advance, the FSS will reinforce the inspection regarding the quasi-insurance company’s ability to pay. So, the quasi-insurance company should hand in financial index factors and results of business to the FSS. Also, the FSS and the post office, the Credit Co-operative Association, the National Federation of Fisheries Cooperatives, and the Saemaeul finance firm will form a council and set up a cooperative system and we expect that this council will be helpful to cope with the situations.
I believe that this improvement will be helpful not only to the consumer, but also to the quasi-insurance companies themselves. Of course, the characteristic of insurance company and quasi-insurance company is little bit different, but as much as insurance has great influence toward consumer, the proper regulation will be needed.