Major Life Insurance Subsidiaries Under Tax Investigation Over Rebate Scandal

Recently, several corporate insurance agencies (GA) under the umbrella of major life insurance companies have come under scrutiny for offering illegal rebates during the sale of insurance policies.

Recently, several corporate insurance agencies (GA) under the umbrella of major life insurance companies have come under scrutiny for offering illegal rebates during the sale of insurance policies. The National Tax Service (NTS) has initiated a tax investigation into 14 GA firms, some of which are subsidiaries of large life insurers like Hanwha, Shinhan, and MetLife. This situation raises concerns about the need for stricter oversight of GA operations to restore trust in the insurance industry.

The Korean insurance industry is facing a significant issue as corporate insurance agencies (GA) are embroiled in a rebate scandal. According to the National Tax Service (NTS), 14 GA firms, including subsidiaries of major life insurance companies like Hanwha Life, Shinhan Life, and MetLife, are under investigation for offering rebates in connection with CEO insurance sales. These agencies allegedly offered rebates to the families of CEOs of companies purchasing insurance.

In this scheme, GA firms registered the CEOs' spouses or children as insurance agents under false pretenses, offering them substantial commissions, sometimes amounting to billions of won. This allowed the corporations to reduce their tax liabilities while providing substantial financial benefits to the CEOs' families without the burden of gift taxes.

The National Tax Service has stated that all 14 GA firms under investigation are suspected of offering illegal rebates, and it plans to impose corporate taxes on the illicit rebate payments. In addition, income taxes will be levied on the families of the corporate executives who received these payments. Some GA firms have admitted to the allegations, while others have denied wrongdoing or claimed the investigation is part of a routine audit.

Furthermore, financial authorities have raised concerns about the GA industry's broader practices, such as the abuse of the "Comp-shurance" model, which targets corporate CEOs. In a similar case earlier this year, a CEO's child repeatedly failed to qualify as an insurance agent, leading to fraudulent contract signings under another agent's name. This resulted in unjust commissions being paid out.

The Financial Supervisory Service (FSS) has warned that it will impose severe penalties on GA firms involved in such illegal activities, including potential business suspensions. It plans to hold GA firms accountable for properly managing their affiliated agents and will enforce strict sanctions against violators.

Trust in the insurance industry hinges on transparency and fair business practices. The recent rebate scandal involving GA firms and life insurance subsidiaries has severely damaged that trust. As authorities take decisive action to address these issues, it is essential for GA firms to strengthen their internal management and ensure compliance with regulations. Only through such measures can the insurance industry regain public confidence and integrity.