Improper Use of Databases in Insurance Sales Can Lead to Severe Penalties: Understanding Legal Regulations

 

Improper Use of Databases in Insurance Sales Can Lead to Severe Penalties

The importance of databases (DB) in insurance sales is growing, but indiscriminate use can lead to severe legal penalties. With the implementation of the Financial Consumer Protection Act (FCPA) in 2021 and the amendment of the Personal Information Protection Act in 2023, regulations on DB collection and use have been strengthened. This article highlights key legal aspects that insurance agents and general agencies (GAs) must be aware of to use DBs correctly.

In the insurance industry, DBs (personal information) have long been a critical sales tool. Insurance agents and GAs prefer high-quality DBs as they can significantly increase productivity, leading to high efficiency and income. By receiving new DBs daily and conducting phone consultations and face-to-face (TA) sales, agents can achieve remarkable results. However, using DBs with unclear sources or beyond the agreed consent can lead to serious legal issues.

Collecting DBs Through Random Calls: Up to 10 Years Imprisonment or a Fine of Up to 100 Million Won

Since the implementation of the FCPA in 2021, generating DBs legally has become challenging due to stricter regulations under the Personal Information Protection Act and the Financial Consumer Protection Act. Despite this, using DBs collected through random calls without clear sources is illegal. Using auto-call systems to make random calls and connect only if answered is considered phishing and is severely punished. According to Article 70 of the Personal Information Protection Act, acquiring personal information by false or illegal means can result in up to 10 years of imprisonment or a fine of up to 100 million won.

Hanging Up When Asked About DB Source: Up to 30 Million Won Fine

When utilizing purchased DBs, agents and GAs must know the source, scope, and purpose of the DB. If a customer asks, "How did you get my personal information?" hanging up or avoiding an answer is a clear violation of the Personal Information Protection Act. Agents must disclose the source and processing purpose of the DB upon the customer's inquiry, according to Article 20, Paragraph 1 of the Personal Information Protection Act. Failure to do so can result in a fine of up to 30 million won as per Article 75, Paragraph 2, Item 3.

Using Purchased DBs Beyond Agreed Consent: Up to 50 Million Won Fine

The current DB market is supplier-driven, making it difficult for GAs and agents to request clear information from suppliers. Suppliers often state in user agreements that personal information may be provided to third parties, thereby avoiding violations. However, GAs and agents must use the DB only for the stated purpose. Using the DB beyond the agreed consent or reselling it is a clear violation. According to Article 17, Paragraph 2 of the Personal Information Protection Act, using personal information beyond the consented purpose without the data subject's consent can lead to up to 5 years of imprisonment or a fine of up to 50 million won.

The importance of DBs in insurance sales cannot be overstated. However, failing to comply with legal regulations and using DBs indiscriminately can lead to significant penalties. It is crucial to use legally obtained permission DBs to ensure compliance with the law and maintain trust in sales. Insurance agents and GAs should be well-versed in these legal aspects to use DBs correctly and continue successful sales operations.