Another Employee Embezzlement... Repeated Incidents of Poor Internal Controls in Insurance Companies

[Image source=Getty Images Bank]

[Asia Economy Reporter Oh Hyung-gil] Incidents of employees embezzling commissions due to poor internal controls at insurance companies are occurring repeatedly. There are calls for a thorough inspection of whether the internal monitoring systems of insurance companies are functioning properly, along with strengthening management systems.

According to the insurance industry on the 5th, an employee at AIG Insurance, a U.S.-based non-life insurance company, was caught embezzling agency commissions for over two years. AIG Insurance recently disclosed that a financial accident involving breach of trust and commission embezzlement amounting to 460 million KRW occurred.

Mr. A, a Corporate Sales Development Manager responsible for corporate group insurance sales in the Personal Insurance Department at AIG Insurance, arbitrarily inserted agency B into contracts for corporate group insurance he managed from January 2015 to August 2017. When the insurer paid recruitment commissions to agency B, he received these commissions back from the agency representative, thereby pocketing the money. It was confirmed that Mr. A had prepared in advance by registering agency B as an affiliated agency in October 2014 for this purpose.

Investigations revealed that AIG Insurance had internal control issues because one person was solely responsible for handling corporate group insurance tasks such as product planning, marketing, agency management, premium collection, commission settlement and payment, and contract renewal. They also paid commissions to agencies without clearly maintaining related documents such as agency contracts or commission payment standards.

After confirming these facts, AIG Insurance immediately stopped paying recruitment commissions to agency B and filed a criminal complaint against Mr. A for breach of trust and commission embezzlement.

An AIG Insurance official explained, "We have now changed the management of all corporate group insurance to be handled directly without intermediary agencies, and assigned separate personnel for each corporate group insurance task to prevent risks arising from monopolization of work processes."

Employees continue to cause incidents by exploiting the gaps in weak internal controls at insurance companies.

The-K Non-Life Insurance (now Hana Non-Life Insurance) revealed that between 2017 and 2018, the head of the asset management team executed loans for real estate development projects without including key collateral preservation measures or credit enhancement conditions. NongHyup Life Insurance also detected that from 2013 to 2016, local NongHyup employees used copies of customers’ ID cards to obtain insurance policy loans and interim insurance loans.