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The Financial Supervisory Service (FSS) has initiated a spot inspection of large General Agencies (GAs) ValueMark and Leaders Asset Advisor due to their high rates of incomplete sales.

The Financial Supervisory Service (FSS) has initiated a spot inspection of large General Agencies (GAs) ValueMark and Leaders Asset Advisor due to their high rates of incomplete sales. These GAs are being scrutinized for their main products and contract retention rates. This article examines the background and key details surrounding this inspection.

The Financial Supervisory Service (FSS) has begun a spot inspection of large General Agencies (GAs) ValueMark and Leaders Asset Advisor. According to the insurance industry, the FSS recently sent a pre-notification of the inspection to the compliance departments of these GAs, with the inspection set to begin on the 28th.

As of the end of last year, ValueMark is a large GA with 2,251 agents, reporting an operating income of 136.4 billion KRW and a net income of 13.7 billion KRW. It primarily sells whole life insurance and term insurance in the life insurance sector, while focusing on long-term guarantee products in the non-life insurance sector. Leaders Asset Advisor, on the other hand, has 1,422 agents, with an operating income of 88.8 billion KRW and a net income of 1.4 billion KRW. Leaders Asset Advisor sells similar products to ValueMark, with a focus on CEO term insurance and short-term whole life insurance.

Industry insiders believe that these GAs were targeted for spot inspections due to poor continuous monitoring indicators. ValueMark’s incomplete sales rate for life insurance products was 0.74%, approximately 9 times higher than the large GA average of 0.076%, making it the highest among all large GAs. Leaders Asset Advisor also exceeded the industry average with a rate of 0.21%. Incomplete sales refer to cases where an insurance planner fails to disclose critical information or misleads consumers through false exaggeration during the sales process.

The 25th-month contract retention rate for ValueMark’s life insurance was 60.61%, which is 10.30 percentage points lower than the large GA average of 70.91%. Leaders Asset Advisor also recorded a retention rate lower than the industry average at 63.84%. Contract retention rate refers to the percentage of previously signed contracts that are still actively maintained.

The insurance industry suggests that incomplete sales likely occurred in CEO term insurance or short-term whole life insurance contracts. ValueMark’s average premium per life insurance contract was approximately 1.38 million KRW, calculated by dividing the total initial premiums of 10.85 billion KRW by 7,784 contracts. The commissions received from insurance companies amounted to 142.6 billion KRW. CEO term insurance was significant enough for the FSS to issue a consumer alert last April.

A senior official in the GA industry commented, "Products with an average premium of around 1.3 million KRW are likely CEO term insurance or short-term whole life insurance, and the high rate of incomplete sales and low contract retention rates may have prompted the FSS inspection."

The FSS’s spot inspection of ValueMark and Leaders Asset Advisor is seen as a crucial step in addressing issues related to high incomplete sales rates and low contract retention rates. For the insurance industry to regain trust and enhance consumer protection, responsible business practices and thorough internal management are essential for GAs. The outcome of this inspection will be closely watched, with hopes that it will lead to positive changes across the industry.