Banning on Insurance Agency Business?

* Written by PPPC Visiting Fellow

 On January 16, the Financial Services Agency announced revisions of

guideline of supervision over insurance companies as public comment.

The news gave a huge impact on the insurance industry, though it had

been partly rumored.

 To explain it in a simple way, in short, it is that the Financial

Services Agency stated explicitly that it is “illegal” that

insurance companies delegate sales of insurance goods to insurance

agencies or re-delegate to independent agents (like self-foreman in

construction industry) with whom insurance companies or agencies do

not have direct labor contracts, according to provisions of the

Insurance Business Act.

 Furthermore, the Financial Services Agency states that it would no

longer allow insurance companies and agencies to delegate sales and

advertisement of insurance goods by literally implementing the law,

and pressured insurance companies and agencies to have direct

employment relationships with such agents if they wanted to keep

delegating/re-delegating sales of insurance goods.

 In recent years, there has been an expansion of insurance agency

business (such as “insurance window”) that handles multiple

insurance goods, but it was in fact backed up by this sort of

re-delegation agencies. This time’s revision of guideline is meant

to eradicate this type of business.

 On this revision, the Financial Services Agency explains that it is

based on the report of working group with regard to provision of

insurance goods and services in the Monetary Council released in June

2013, and it was decided as part of revision of rules of

advertisements and sales of insurance goods.

 However, actually looking at the report, it could be implied as a

suggestion toward strengthening monitoring over the agents (compulsory

report, on-the-spot inspection, etc.) as well as enhancing training on

employees who engage in insurance businesses irrespective of

employment relationships (in other words, not necessarily demanding to

make direct employment contracts as regular employees).

 Nevertheless, this time, the Financial Services Agency has shifted

its direction suddenly to prohibit all kinds of re-delegation agencies

accordingly with the basic principle.

 On this policy shift, many scream in alarm at sites. A young agent

says “I have worked with pride as an independent business agent,

rather than as an employee of agency, since I left a major insurance

company. It is so unfortunate that this will no longer be authorized.

It is difficult to start up an official agency with the current

business scale, so I must find a job in other agents.”

 In the background of expansion of re-delegation agencies, in the

first place, there was a deregulation in 2000 regarding “employees”

engaging in damage insurance business that deleted a sentence saying

“employment relationship with agents” as its condition; it was

according to requests from the insurance industry to expand the scope

for temp labors.

 Although there was no such provision regarding life insurance, the

same idea has been applied and it has regarded not only the temp

labors but re-delegated agents as “employees” and many agencies have

delegated advertisements and sales of insurance goods to such

independent agents.

 The authority’s view would probably be that it is necessary to have

a regular employment relationship with agents in order to keep every

employee under thorough training, instruction and supervision, though

obviously visible problems have yet to be made tangible.

 However, it seems that there should have been other alternative

measures to support training, instruction and supervision over such

re-delegated agents. To make them “salaried workers” is not the only

way. A vision of insurance agent working with pride as an independent
entrepreneur should have been sought.