CEO Insurance 'Rebate' Rampant... Financial Supervisory Service Announces Strong Sanctions

72 Billion KRW Recruitment Commission Paid to Fake Designers
Also Paid Instead of Labor, Tax, and Patent Fees
"Maximum Legal Sanctions Allowed for Illegal Acts"

Corporate insurance agencies (GAs) have been found to have paid more than 7 billion KRW in recruitment commissions to unqualified individuals while inducing subscriptions to executive recognition insurance (CEO insurance). Cases of providing money or other benefits to policyholders during the insurance contract acquisition process were also confirmed.

According to the Financial Supervisory Service (FSS) on the 31st, on-site inspections were conducted from October last year to March this year on four GAs handling CEO insurance, revealing improper commission payments and provision of special benefits.

CEO insurance refers to a type of protection insurance subscribed to by small and medium-sized enterprises (SMEs) with the CEO or other executives as the insured, to prepare for contingencies such as the absence of management. Recently, the insurance industry has expanded sales by emphasizing higher refund rates or tax-saving effects beyond the original purpose. In this process, a so-called 'Comsurance'?an irregular sales method where special relations of the corporate CEO, such as children or spouses, are appointed as agents, contracts are made with the corporation, and recruitment commissions are paid to these special relations?also became widespread.

Financial Supervisory Service, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

The problematic GAs recruited 550 CEO insurance policies and paid 7.2 billion KRW in commissions to 179 unqualified individuals. They falsely registered special relations of SMEs as insurance agents and paid recruitment commissions for CEO insurance, averaging 40 million KRW per person. This constitutes improper commission payments, and penalties such as fines, business suspension, institutional warnings or cautions, and reprimands to CEOs are expected.

One GA also illegally provided special benefits to policyholders while acquiring 59 CEO insurance contracts. They directly provided money to the policyholders?SMEs as insured parties?or paid 600 million KRW on behalf of SMEs for labor, tax, and patent service costs. This GA may face institutional and executive measures such as license cancellation, business suspension, CEO dismissal recommendation, and CEO duty suspension.

An FSS official stated, "We will continuously monitor illegal and unsound sales practices during the sales process and impose the maximum legally permissible sanctions on confirmed violations such as improper commission payments and provision of special benefits to restore market order. We will also consider strengthening internal controls, including restricting sales to individuals and improving explanatory materials, to prevent incomplete sales related to CEO insurance."