GA Fined 100 Million Won for Fake Contracts: Financial Supervisory Service Takes Action

Recently, the Financial Supervisory Service (FSS) imposed a 100 million won fine on the General Agency (GA) 'Won Financial Services' for engaging in fraudulent insurance contracts known as 'written contracts.' 

Recently, the Financial Supervisory Service (FSS) imposed a 100 million won fine on the General Agency (GA) 'Won Financial Services' for engaging in fraudulent insurance contracts known as 'written contracts.' This action aims to address illegal practices and establish a sound insurance sales order. Let's delve into the definition of written contracts, the issues they pose, and the FSS's response to these fraudulent activities.

The recent issue in the financial sector involves the GA 'Won Financial Services,' which has been penalized for engaging in 'written contracts,' a type of fraudulent insurance contract. The Financial Supervisory Service has fined the company 100 million won and issued a warning to the company's executives regarding legal violations.

'Written contracts' refer to fraudulent insurance contracts where an individual's name is borrowed or contracts are signed without the consent of the actual policyholder. Won Financial Services was found to have solicited 194 property insurance contracts under false names between March 6 and November 29, 2019. They collected an initial insurance premium of 33 million won and commissions of 125 million won unlawfully.

According to Article 97 of the Insurance Business Act, individuals involved in insurance contract solicitation and conclusion must not solicit contracts using names other than those of the actual policyholders or without the policyholder's consent. 

Written contracts allow GA and agents to gain commission profits while increasing the sales performance of insurance companies. Meanwhile, name borrowers enjoy insurance benefits without paying premiums, which ultimately leads to higher insurance premiums for the general public. Due to these reasons, written contracts are strictly prohibited as illegal activities, though they have been a persistent issue due to the pursuit of short-term performance and commission earnings by some GAs and agents.

To combat this, the FSS has implemented a self-correction period since early this year and has decided to impose the maximum legal penalties on detected written contracts. Under the Insurance Business Act, fines of up to 10 million won per violation can be imposed, with additional penalties such as registration cancellation or suspension of operations within six months possible.

The FSS stated, "We will address serious market disruption activities that undermine the sound insurance solicitation order and consumer interests by forming special inspection teams to restore market order."

Written contracts are a severe illegal activity that undermines transparency in the insurance industry and harms consumers. The recent penalty imposed by the Financial Supervisory Service is a crucial step towards eradicating these practices and establishing a trustworthy insurance market. It is essential for GAs and agents to focus on building long-term trust and adhering to proper insurance solicitation practices rather than pursuing short-term gains.