Regulatory Issues of Concern to European Insurance Companies in Korea Introductory Comments: If the current global financial turmoil has proven one thing, it has proven the importance of properly managing risk. In the end this is the task of viable and healthy insurance industry - underwriting and managing risk. The EU Chamber of Commerce in Korea (EUCCK) Insurance Committee thrives to assist the Korean authorities in making the Korean insurance market a world leading market, where risk is managed properly. Since the financial crisis in 1997/1998, Korea has made significant progress in restructuring the financial sector, overhauling its regulatory system and opening up the financial services sector to foreign investors. Furthermore, the FSS has committed to create more transparent and predictable rules and regulations and acknowledged that many foreign investors have been complaining that Korea's regulations sometimes give regulators excessive lee-way in interpreting and enforcing rules and regulations. Unexpected regulatory changes have been said to inflate the cost of doing business in Korea for foreign investors. In October 2007, the FSS announced a new “Roadmap for Advanced Financial Supervision” which contains a list of 100 major tasks, aimed at changing the paradigm of financial supervision within 3 years. The new plan calls for a transition from rule-based supervision to principle-based supervision, a one-stop service for license applications, a drastic improvement of financial supervisory practices, the creation of a foreign investor friendly financial environment and adoption of global supervision standards. The EUCCK Insurance Committee fully appreciates the strong commitment from FSC, FSS, and Ministry of Strategy and Finance (MOSF) towards further regulatory reform and liberalization of the financial services sector. We fully support these reforms and would like to contribute to Korea's efforts to become a financial centre in North East Asia. To achieve this important aim we look forward towards further cooperation and industry consultation. Currently the FSS' procedure to revise laws and regulations is often times unilaterally done to meet the timeline set instead of collecting opinions from the industry and taking into consideration the preparation periods for the industry. As a result, insurance companies have a very tight schedule to prepare and have to re-produce the policy provisions and brochures within 2-3 months, which is not efficient in terms of business and cost. Since the impacts of the revision of product regulations and systems are significant, we kindly ask the regulator to consider the practically feasible preparation duration and set a timeline where we can reflect a multiple of change instead of a case-by-case change. Items Issues Recommendations Open Environment Open Access: It is essential that Korea provides open and non-discriminatory access to the main terrestrial communication network and to content provided in this network. This access should be fair and provide an equal opportunity to every new market participant. Each operation should be independent from the perspective of operation, people, finance, etc, and this compliance should be monitored by the regulatory authority. Currently this is not the case. Connection Charge The connection charge to connect to the main terrestrial communication network and content in this network is currently considerably more expensive to new participants in Korea than in any European countries. This acts clearly as an invisible barrier for new services. This is one of reasons why Korea lacks behind Europe in IP-based services, even Korea is the leading country in terms of broadband penetration globally. The point in liberalizing telecommunication services is how to build an environment, which will drive for fairer competition between downstream operators (network and/or services). If this development is properly nurtured, new and creative services are likely to bloom. This will naturally help finally national competitiveness and efficiency. Hence, the EUCCK recommends the Korean Government to pay utmost attention to open access and to lowering connection charges to internationally competitive level. For example, in Northern Europe any player has right to access to network and contents with reasonable price. Business Licence Currently Korea takes a very strong position against cross-border provision of telecommunication related services. In an interconnected and linked world of global teleconnections this policy seems both outdated and also harmful for the Korean consumers. International standard is to allow cross-border provision of these services, as long as the service provided does not harm the consumers and society. The EUCCK recommends that cross-border provision of telecommunication services without local registration should be allowed, as long as the service provided is deemed not harmful based on other laws and regulations. Operators Choice of Open and Global Technical Requirements Global players’ limited success in Korea could be partially due to the dominance of local mobile phone manufacturers. However, the fundamental reason for the limited success is government's national standards, and operators 'closed' business model and the proprietary nature of technical requirements. The ‘open’ business model and global standards will provide Korean consumers with more choice of mobile handset and lower prices; the proprietary requirements can be considered as barriers and discriminatory to global suppliers and add cost to Korea consumers and gives them a limit choice of mobile handset. Operators’ choice of open and global technical requirements should be strongly encouraged for the benefit of consumers. The following are the examples: 1.IMEI Disclosure It is global and international recommendation that all the GSM and WCDMA phones disclose each phone’s inherent IMEI number on the handset and on the sales package. However, in Korea’s 2G CDMA world, the IMEI equivalent ESN was prohibited to be disclosed due to illegal duplication reason. Now Korea is in more advanced 3G WCDMA world and technology is evolving, but Korea is still insisting the wrong requirements to the wrong technology thereby negating all the benefits from this advanced technology world. In WCDMA world, the IMEI number and USIM card are separated so that there is worry of illegal duplication. This IMEI is being used for many feature applications like Try & Buy concept (application download, which is verified with IMEI, etc.), DRM related applications, and Symbian certification for other globally available applications. This IMEI will be a good id when repair service is needed outside Korea. Some manufacturers in Korea oppose IMEI disclosure to global suppliers to prevent global players from entering the Korea market. It is ridiculous since they print IMEI numbers on the WCDMA phones and on the sales packages when they export the phones to outside Korea. 2.SMS Interoperability under USIM-Unlock Korea government is planning a complete USIM-Unlock which will enable a user can use his or her USIM card either in SKT or in KTF handsets. The SMS interoperability is one of the applications which should work under this USIM-Unlock environment. Korea has been using Korea unique Korean coding schemes; however, SKT and KTF have each different coding scheme and they have to convert back and forth the SMS messages when to communicate the legacy 2G handsets. For Korean language, there is an UCS2 global standard which is used in the wireline PC environment, currently in Korea. By continuously adopting Korea unique standards, the cost of handsets are increased and Korean users cannot enjoy Korean SMS outside Korea. Since the SMS has to be interoperable between SKT and KTF networks, when one operator chooses global standards and if the other operators does not, then a global supplier with global standards cannot do the business with one operator in Korea with the current regulatory requirement. This again limits the choice of consumers and their benefits. 3.20/24 Charger issue One example of a possible technical barrier to trade is the 24/20 pin connector requirement in mobile phones: Korean regulator requires compatibility of all the mobile phones with the 3rd party mobile phone chargers and cross manufacturers to lower handset purchase cost and due to environmental reasons. Although these objectives are very important, the mandatory requirement in effect increases the cost of handset due to either unique phone design for Korean market or requiring electrical adapter for the handset based on a global standard. It is best to seek for alternative means to protect the environment, e.g., to leave for the consumers to buy a charger with the handset and standardize a globally recognized charger interface for future mobile handsets (e.g. using a USB interface which is currently under discussions in various global and national standard forums). This mandatory connector requirement can be seen as a technical trade barrier due to increased development and material cost for the handset maker which leads to higher terminal cost for the consumer. 1.Korea should allow IMEI disclosure on the handset and on the sales package. Korea should adopt UCS2 global standard, which is used in the wireline PC environment, also as the standard for Korean language SMS to allow interoperability of handsets. Korea should standardize a globally recognized charger interface for future mobile handsets (e.g. using a USB interface which is currently under discussions in various global and national standard forums). Korea should promote transparency in the way government (or any non-government bodies) develop and apply technical regulations and related conformity assessment procedures.