Recently, due to the excessive pursuit of performance and commissions by insurance planners, practices such as 'proxy contracts,' where a planner uses another planner's name to conduct business, and improper commission payments have frequently occurred. These sales practices significantly increase the possibility of incomplete sales, causing consumers to subscribe to products unrelated to their intended purpose.
Accordingly, financial authorities plan to significantly strengthen sanctions, including registration cancellations, against illegal activities such as proxy contracts and improper commission payments prevalent in the sales field of General Agencies (GA). They will also actively conduct continuous monitoring and inspections of irregular sales practices, such as comp-surance sales and briefing sales, which lead to improper commission payments.
On the 16th, the Financial Supervisory Service (FSS) announced major illegal acts and sanction cases to establish order in GA sales, along with cases violating the prohibition of improper proxy contracts and future plans.
A 'proxy contract' refers to an insurance contract concluded using the name of a planner other than the one who actually solicited the insurance contract. This occurs when a planner borrows another planner's name during job transitions or suspension periods or funnels contracts to a specific planner to obtain higher incentives. This is prohibited under the Insurance Business Act, and a fine of up to 10 million KRW per violation can be imposed, along with possible registration cancellation and suspension of business for up to six months.
'Improper commission payment' refers to the act of financial product sales agents or intermediaries, such as planners or GAs, having third parties perform insurance solicitation tasks and paying related solicitation commissions. This mainly occurs in irregular insurance sales processes such as comp-surance sales or briefing sales. It is prohibited under the Financial Consumer Protection Act, and a fine of up to 30 million KRW per violation can be imposed, along with corrective orders, suspension, and public posting orders.
According to the FSS, from 2020 to 2023, over four years, GAs were subjected to registration cancellations and fines totaling approximately 3.5 billion KRW for proxy contracts and improper commission payments. Measures such as dismissal recommendations and salary reductions were imposed on affiliated employees, while planners faced registration cancellations, business suspensions (30 to 90 days), and fines ranging from 200,000 to 35 million KRW.
An FSS official stated, "We plan to impose strict sanctions without any leniency on illegal activities such as proxy contracts and improper commission payments, which are widespread and repeatedly occur in GA sales fields." The official added, "In particular, by strengthening institutional sanctions such as GA business suspensions, we will hold GAs more strictly accountable for managing their affiliated planners."
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