The Impact of a 4.2 Billion Won Insurance Payment Scandal on the Industry

This post examines the implications of these actions, their impact on the industry, and the response from the Financial Supervisory Service (FSS).

A recent scandal involving insurance agents who paid insurance premiums on behalf of high-income professionals, such as pharmacists, has brought illegal activities within the insurance industry into the spotlight. This post examines the implications of these actions, their impact on the industry, and the response from the Financial Supervisory Service (FSS).

The Financial Supervisory Service (FSS) recently conducted a large-scale crackdown on illegal activities within the insurance industry, uncovering multiple violations of the "Prohibition of Providing Special Benefits" regulation. The focus was on insurance agents who targeted high-income professionals, such as pharmacists, by paying their insurance premiums or offering expensive gifts.

From 2016 to 2019, 32 insurance agents affiliated with General Agencies (GAs) paid over 4.2 billion won in insurance premiums, leading to 1,026 insurance contracts. These actions clearly violated the "Prohibition of Providing Special Benefits" regulation under the Insurance Business Act. As a result, the FSS imposed sanctions, including business suspensions and license cancellations for the involved agents. The GAs that allowed these illegal activities were also penalized, with some facing license cancellations.

Additionally, some agents were caught offering expensive gifts, exceeding 30,000 won, such as car seats, strollers, and gift certificates, to customers when selling children's insurance at baby fairs or through parenting-related online communities. This too was considered a violation of the "Prohibition of Providing Special Benefits" regulation, leading to further sanctions from the FSS.

The Insurance Business Act strictly prohibits providing monetary benefits, paying premiums on behalf of customers, or offering unsubstantiated premium discounts during the process of signing or soliciting insurance contracts. Such illegal activities disrupt fairness among policyholders, provoke excessive competition, and severely damage the credibility of the insurance industry. Furthermore, these actions pose a significant risk to the financial stability of insurance companies.

Over the past four years, the FSS has taken strong actions against these violations. Four insurance agents had their registrations canceled, and 16 individuals were reported to investigative agencies. Additionally, four GAs had their licenses revoked, and one executive was recommended for dismissal. Moving forward, the FSS plans to impose the maximum legal penalties on those who condone or fail to control illegal special benefits within their institutions.

This recent scandal highlights the serious repercussions that illegal activities can have on the insurance industry. It serves as a reminder that not only insurance agents but also GAs and customers who receive illegal benefits can be held legally accountable. For the insurance industry to restore trust and maintain fair competition, strict adherence to the law by all parties involved is essential, along with strong regulatory oversight from the FSS.