Insurance Industry Braces for Worker Presumption Reform

About 712,000 Insurance Planners Could Be Recognized As Workers, Creating Trillion-Won Social Costs

The insurance industry expects that approximately 60% (427,200) of insurance planers will be converted into workplace subscribers for the National Pension and National Health Insurance.

As labor law reforms are being pushed to integrate special-type employment workers, platform workers, and freelancers into the institutional system, the insurance industry has fallen into deep consideration. With social costs required for over 700,000 insurance planners expected to reach trillions of won upon the system’s introduction, concerns are being raised that the specific characteristics of the industry must be taken into account.

According to the Ministry of Employment and Labor on May 11, the introduction of the Presumption of Worker Status and the Framework Act on the Rights of Working People, a so-called ‘Basic Workplace Act’ package, is being pursued under the leadership of the government and the Democratic Party of Korea. Full-scale social discussions are expected to proceed after the local elections on June 3.

The Presumption of Worker Status is a system where a person is presumed to be a worker once the fact of providing labor is confirmed, and worker status is recognized if the employer fails to disprove it. This means that while previously workers had to prove their own worker status, employers will bear the burden of proof in the future.

The insurance industry anticipates that the core of this amendment to the Labor Standards Act will be the Presumption of Worker Status. This is because if 700,000 insurance planners are recognized as workers, mandatory provisions under the Labor Standards Act, such as the minimum wage, the 52-hour workweek system, severance pay, weekly holiday allowance, and the four major social insurances, will be applied. It is estimated that the costs required to be paid to insurance planners, who have thus far been classified as special-type employment individual business owners, will reach trillions of won.

As of the end of last year, there were around 712,000 domestic insurance planners. The industry expects that approximately 60% of them (427,200) will be converted into workplace subscribers for the National Pension and National Health Insurance. When estimated based on the planners’ monthly average income of 3.29 million won ($2,531) last year, it means an annual social cost of around 1.6 trillion won ($1.23 billion) will be generated. Half of this amount will be borne by the employers, namely insurance companies and general agencies (GA), and the remaining half will be borne by the individual planners.

As the recognition of insurance planners’ worker status is expected to have a massive impact across the industry, it is pointed out that reasonable measures reflecting the characteristics of the insurance sector should be discussed. The judgment is that insurance planners cannot be compared on the same level as general workers because they do not have fixed office attendance and sell products through commission contracts.

Accordingly, preparations for responses are busily underway in each business sector. The Korea Life Insurance Association plans to primarily monitor the situation as the Presumption of Worker Status takes root and to make recommendations so that the industry’s specific characteristics can be reflected. The General Insurance Association of Korea is participating in relevant meetings of the Korea Enterprises Federation to convey its opinions.

The Korea Insurance Agency (GA) Association is reviewing legal judgments on whether the worker status of insurance planners can be recognized upon the introduction of the Framework Act on the Rights of Working People and the Presumption of Worker Status. It also plans to look into major legal risks as well as the possibilities of risks and disputes. Moving forward, it intends to establish customized labor management guidelines and manuals for the GA sector and support the system’s settlement for each GA.

An insurance industry official stated, “Because the scale of planners in the insurance industry is so large and this is a sensitive issue, we are approaching it cautiously,” adding, “The urgent priority is to observe the system settling into other industries such as manufacturing, and it seems the future direction of our response will be determined accordingly.”

Yoon Young-sil