Now Facing License Revocation... Consecutive Severe Sanctions on Insurance Agencies for 'Incomplete Sales' (Comprehensive)

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] Tae Wang Partners, a corporate insurance agency (GA) notorious for incomplete sales, has been severely sanctioned by financial authorities. It was revealed that dozens of agents disrupted the order of recruitment activities, leading to the cancellation of their registration. The GA industry has been shocked as severe penalties have been consecutively imposed on GAs with inadequate insurance consumer management.

According to financial authorities on the 22nd, the Financial Supervisory Service recently imposed a registration cancellation and a fine of 200 million KRW on GA Tae Wang Partners for violating the Insurance Business Act by engaging in prohibited acts related to the conclusion and solicitation of insurance contracts. Additionally, three executives were recommended for dismissal, and 95 insurance agents were notified of business suspensions ranging from 30 to 180 days along with fines.

The penalties were unusually severe among recent sanctions against GAs because multiple violations of prohibited solicitation acts and prohibited special benefit provisions were found.

From 2018 to 2019, 54 agents affiliated with Tae Wang Partners processed 3,913 insurance contracts they had solicited as if they were solicited by other agents, receiving recruitment commissions totaling 3.066 billion KRW. Four agents deceived by processing 223 insurance contracts they had solicited as if they were solicited by agents belonging to other insurance agencies, receiving commissions of 100 million KRW.

Tae Wang Partners also paid recruitment commissions of 1.459 billion KRW to 63 individuals who either did not have insurance solicitation qualifications or were not affiliated agents. Under the current Insurance Business Act, commissions cannot be paid to agencies or agents without a consignment contract.

Following Leaders Financial Sales, Rich & Co... Emphasis on Recruitment Order and Consumer Protection

Furthermore, 33 agents affiliated with Tae Wang Partners provided special benefits amounting to 1.726 billion KRW by paying premiums on behalf of approximately 1,760 insurance contract holders for 4,366 contracts.

In this process, other GA-affiliated agents who received recruitment commissions by processing insurance contracts they had solicited as if they were solicited by agents affiliated with Tae Wang Partners were also subjected to business suspensions and fines.

Tae Wang Partners was revealed to have engaged in large-scale disorderly conduct in insurance solicitation during the comprehensive inspection by the Financial Supervisory Service in 2019, and severe disciplinary action had been anticipated. However, the GA industry was shocked by the decision of registration cancellation, which is effectively an expulsion. This comes amid a series of severe sanctions against GAs recently.

In January, the Financial Supervisory Service imposed a fine of 100 million KRW on the large GA Rich & Co for violating the Insurance Business Act by having insurance agents sign on behalf of contract holders without obtaining their handwritten signatures when concluding insurance contracts.

In addition, in July of last year, Leaders Financial Sales, considered a major GA, was severely sanctioned with a fine of 3.1 billion KRW and a 60-day business suspension. After the severe sanction, Leaders Financial Sales effectively exited the market by selling some of its business units to Shinhan Life’s sales subsidiary.

Supervision and management of GAs are expected to be further strengthened in the future. The Financial Supervisory Service, along with the Life and Non-life Insurance Associations, is reviewing measures to control GA operations through the ‘Sales Channel Advancement Task Force.’ Especially with the Financial Consumer Protection Act coming into effect next month, penalties for incomplete sales will be strengthened, raising concerns that GA operations will be further constrained.