Home Supervision Financial Institutions Prudential Regulation and Supervision Classification of Financial Services Businesses

Classification of Financial Services Businesses

Insurance Companies

The insurance law provides for three types of insurance services: life insurance, nonlife insurance, and hybrid insurance. Businesses that insurance companies may carry on are divided into three broad types: primary business, secondary business, and concurrent business

Primary Businesses

The primary businesses for insurance companies are life insurance, nonlife insurance, and hybrid insurance. Whereas life insurance provides benefits to a designated beneficiary upon the death of the insured person (or a similar event) in exchange for regularly paid premium, nonlife insurance gives protection for property losses, personal injuries, and liabilities. Life insurance extends to pension insurance including retirement insurance, while nonlife insurance covers fire insurance, marine insurance, auto insurance, guaranty insurance. Hybrid insurance covers insurance for injuries, illness, and long-term care.

The Insurance Business Act makes it illegal to carry on both life and nonlife insurance businesses because of differences in risks covered and the risk of losses in one insurance business spilling over to the other.

Secondary Businesses

Insurance companies may carry on businesses secondary to the primary businesses. The Insurance Business Act does not specify secondary businesses for insurance providers, but the FSC/FSS must be notified at least seven days in advance before an insurance company begins a secondary business.

Concurrent Businesses

Insurance companies may carry on certain noninsurance businesses concurrently with their insurance business, provided that the noninsurance businesses do not undermine the safety and soundness of the insurance companies or harm policyholders. The concurrent businesses for insurance companies include securitized asset custody services, electronic money transfer services, broker/dealer services for financial investment products, and retirement pension funds.