GA Designer Insurance via Cards
- Card companies are increasingly adopting a business model known as "bokdae-ri branch," where they outsource insurance sales to insurance agencies, also known as General Agencies (GAs).
- The bokdae-ri branch structure essentially involves card companies re-commissioning insurance sales to GAs.
- Traditionally,card companies engage in "card-surance" by selling insurance products through internal telemarketing (TM) operations.
Card companies Expand Insurance Sales Through Agency Partnerships, Raising Consumer Protection Concerns
Table of Contents
- Card companies Expand Insurance Sales Through Agency Partnerships, Raising Consumer Protection Concerns
- Card Companies Partnering with Agencies too Sell Insurance: What You Need to Know
- Key Takeaways
- Frequently Asked Questions About Card Company Insurance Sales
- What is the “bokdae-ri branch” model for insurance sales?
- How does this differ from customary card-linked insurance?
- What are the roles of each party in this model?
- What customer data is shared in this model?
- What are the potential consumer protection concerns related to this model?
- Are there any regulatory loopholes that enable this practice?
- Why is this exception concerning?
- What is the industry outlook for this type of partnership?
Card companies are increasingly adopting a business model known as “bokdae-ri branch,” where they outsource insurance sales to insurance agencies, also known as General Agencies (GAs). this expansion raises concerns about potential consumer harm and unclear lines of obligation in case of disputes.
The Rise of Bokdae-ri Branches
The bokdae-ri branch structure essentially involves card companies re-commissioning insurance sales to GAs. According to sources within the insurance industry, Samsung Card has already begun commissioning sales to insurance agents, including direct sales of insurance products. Lotte Card introduced the bokdae-ri branch sales method in April of last year, and other card companies are reportedly considering similar arrangements.
How Card-Linked Insurance Works
Traditionally,card companies engage in “card-surance“ by selling insurance products through internal telemarketing (TM) operations. However, the bokdae-ri branch model differs significantly. Under this model, the insurer re-commissions sales to the GA and provides customer databases. These databases contain sensitive customer information, including:
- Name
- Date of birth
- Gender
- Address
- Mobile phone number
- Bank account
- Card status
- Insurance premium details
If a GA successfully uses the card company’s customer database to secure an insurance contract, the card company receives a portion of the fees paid by the insurer to the GA.
Consumer Protection Concerns
A key concern is that consumers may not fully understand this complex structure. This lack of transparency can lead to confusion and difficulty in assigning responsibility when disputes arise. The involvement of multiple parties – the insurer who designed the product,the card company providing the customer data,and the GA handling the sale – complicates accountability.
Regulatory Loopholes
While the Financial Consumer Protection Act generally prohibits financial product sales agents from re-commissioning surrogate and brokerage services to third parties, an exception exists for insurance agencies. The Enforcement Decree of the Golden Law Act acknowledges that insurance agencies can sign consignment agreements with designers or other insurance agencies.
This exception was initially intended to accommodate situations where insurance brokers and designers need to share commissions on large contracts,such as corporate insurance. However, the interpretation that insurance agencies can re-commission sales business may create vulnerabilities in financial consumer protection.
This could potentially extend to scenarios where banks entrust their jobs to GAs in “bank-surance” arrangements, or where general GAs outsource insurance sales to other GAs.
Industry outlook
According to an insurance industry official, while the current scale of bokdae-ri branch business is relatively small, it could be viewed as an area operating outside of strict regulatory oversight.
Card Companies Partnering with Agencies too Sell Insurance: What You Need to Know
(Image: Financial District)
Key Takeaways
Card companies are expanding their insurance sales through partnerships with insurance agencies.
This “bokdae-ri branch” model raises consumer protection concerns.
Regulatory loopholes may create vulnerabilities.
Frequently Asked Questions About Card Company Insurance Sales
What is the “bokdae-ri branch” model for insurance sales?
The “bokdae-ri branch” model is a business arrangement where card companies outsource insurance sales to insurance agencies, also known as General Agencies (GAs). This means that instead of selling insurance themselves (traditionally through telemarketing), card companies commission GAs to sell insurance products to their customers.
How does this differ from customary card-linked insurance?
Traditionally, card companies engage in ”card-surance” by selling insurance products through internal telemarketing (TM) operations.The “bokdae-ri branch” model differs because the card company re-commissions sales to the GA.
What are the roles of each party in this model?
in this arrangement, multiple parties are involved:
Card Company: Provides customer data, receives a portion of fees.
Insurer: Designs the insurance product.
General Agency (GA): Handles the sale of the insurance product to the customer.
The card company provides customer databases to the insurance agency.These databases contain sensitive customer details,including:
Name
Date of birth
Gender
Address
Mobile phone number
Bank account
card status
* Insurance premium details
A meaningful concern is that consumers may not fully understand this complex structure.This lack of clarity can lead to confusion adn difficulty in assigning duty when disputes arise. The involvement of multiple parties complicates accountability.
Are there any regulatory loopholes that enable this practice?
Yes, while the Financial Consumer Protection Act generally prohibits financial product sales agents from re-commissioning brokerage services to third parties, an exception exists for insurance agencies. The Enforcement Decree of the Golden Law Act acknowledges that insurance agencies can sign consignment agreements.
Why is this exception concerning?
This exception was initially intended for situations where insurance brokers and designers share commissions on large contracts. However, the interpretation that insurance agencies can re-commission sales business may create vulnerabilities in financial consumer protection. This could extend to other areas like “bank-surance” arrangements.
What is the industry outlook for this type of partnership?
According to an insurance industry official, the current scale of the “bokdae-ri branch” business is relatively small.However,it could be viewed as an area operating outside strict regulatory oversight.