Farm cooperative blocked from entering insurance biz

SEOUL, Dec. 4 (Yonhap) -- The national farm cooperative has been blocked from
entering the insurance business after meeting stiff resistance from existing
insurers, government sources said Friday.

The agriculture ministry and the Financial Services Commission (FSC) said they
have decided to disallow the cooperative's entrance into the insurance market,
going back on a pre-announcement in which they said they would permit the move.
Under the original plan, a mutual aid association directly managed by the
National Agricultural Cooperative Federation (Nonghyup) was to be renamed "NH
Insurance" and permitted to sell insurance policies.
The insurance firm would have been split from the cooperative and come under the
control of a new Nonghyup financial holding company the government wants to set
up around 2011 under a sweeping master plan.
The proposal drew fire from local insurers who claimed that allowing the
cooperative -- which has a nationwide network of 4,000 offices -- would create
unfair competition. They pointed out that Nonghyup is closely linked to the
government and receives various benefits.
"Policymakers thought it would be possible to set up an insurer under the Noghyup
financial arm, but the FSC did not agree," an agriculture ministry official said,
hinting that there was disagreement within the government.
An FSC official said the latest decision move does not prevent the cooperative
from offering mutual aid benefits and services to members.
"If a bank is set up under Nonghyup's financial holding company, it can sell
various mutual aid products although it will be barred from handling insurance,"
he said.
The original government-led plan was aimed at streamlining operations and raising
the productivity of the 2.4 million-strong cooperative. The administration is
still trying to move ahead with a strategy to split Nonghyup into three parts,
which it says will better help meet market demands and enhance transparency and
accountability.
The last three heads of the cooperative have gone to jail for bribery-relate
crimes, and Nonghyup has come under increasing criticism that it is not doing
enough to help farmers.
The three parts are to be the central cooperative federation and two holding
companies each tasked with controlling financial services and agricultural
business operations.
The central cooperative federation will take charge of non-profit operations
related to training farmers, agricultural consulting and auditing, and broad
support of rural communities.
yonngong@yna.co.kr
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