Following years of pressure by U.S. government trade negotiators, five U.S. life insurance companies recently received permission to enter South Korea's insurance market, which is worth $6 billion a year.
In 1985, U.S. trade officials filed a formal complaint against the South Korean government and both sides have been negotiating ever since, according to Gordon Cloney, president of the International Insurance Council in Washington.
Four firms plan to set up joint ventures with South Korean firms. A fifth, the Prudential Insurance Co. of America, was allowed to set up a wholly owned subsidiary, according to a recent announcement by the South Korean Ministry of Finance.
The four companies have chosen well-established Korean partners. Aetna International will be working with Dongbu Steel Co., Metropolitan Life Insurance with the Kolon Group, Connecticut Mutual Life Insurance with Coryo Securities Co. and Mutual Benefit Life Insurance with Tong Yang Cement Co.
"The opportunities in the Pacific Rim are exciting," said Richard F. Moore, Prudential's vice president of international insurance. "The economy is growing at a tremendous rate."
Moore said the first step is to educate the Korean people because, "in the past insurance was not looked upon as a need and was not even understood."
He said Prudential plans to hire as many Koreans as possible to run the subsidiary. "We want it to be as much of a Korean company as possible."
Henry E. Kates, president of Mutual Benefit Life Insurance in Newark, N.J., said Mutual, which will own 49% of the new Korean venture, intends to target the needs of Korean businesses and "upscale, affluent professionals."
Mutual's decision to move into South Korea is the first step in a new global insurance marketing strategy, Kates said.
John J. Creedon, president and chief executive of Met Life, said he was very pleased that the South Korean government approved the company's request to do business. Met Life's venture partner is the Kolon Group.
"Met Life's reputation for providing innovative products and services will help to set new standards of quality and excellence for the Korean insurance industry," said Dong Chan Lee, chairman of the Kolon Group.
Spokesmen for Connecticut Mutual and Aetna said the move into South Korea is part of on-going international marketing strategy.
The five new companies join two U.S. firms that have been operating in Korea for about 20 years, according to the Insurance Council's Cloney. The American International Group and Cigna Worldwide were the first U.S. insurers to set up branches in South Korea. "The nature of the Korean economy suggests that it is not going to be easy for the foreign insurer," said Cloney. "It will probably be a business that will develop slowly and over time."
U.S. insurance companies moving into Korea are likely to have experiences similar to U.S. companies in Japan. There, U.S. firms have a 3% share of the insurance market, representing about $200 million a year, Cloney said. He said the companies will not have to cope with cultural differences, but will have to adjust to the antiquated regulatory system governing Korea's insurance industry.
Sears, Roebuck & Co.'s Allstate Life Insurance unit was denied permission to sell policies because it failed to meet a technical requirement. However, the ministry official said Allstate could set up its joint venture with Samwhan Corp. as soon as it meets the requirement.