Financial Supervisory Service Uncovers Massive Violations at Mirae Asset, Hanwha, Dongyang, Fubon Hyundai, etc.
Total Fines Amount to 4.46 Billion KRW
Inducing Cancellation of Valid Insurance Contracts to Switch to Similar New Policies
Samsung Life Also Found Guilty of Incomplete Sales of Financial Investment Products Worth 23 Billion KRW
Major life insurance companies such as Samsung Life Insurance and Mirae Asset Life Insurance were fined over 4.4 billion KRW for engaging in so-called 'unfair policy replacement' sales practices, where they unjustly terminated existing insurance contracts and induced customers to apply for new insurance contracts.
According to the Financial Supervisory Service (FSS) on the 3rd, the Insurance Inspection Division 1 identified violations of the 'Prohibited Acts Related to Insurance Contract Conclusion or Solicitation' through on-site inspections of nine companies including Samsung Life Insurance, Mirae Asset Life Insurance, Hanwha Life Insurance, Tongyang Life Insurance, Fubon Hyundai Life Insurance, Shinhan Life Insurance, ABL Life Insurance, IMLife Insurance, and Heungkuk Life Insurance. The FSS imposed fines and notified relevant executives and employees of necessary voluntary corrective actions. The total amount of fines imposed on the nine companies reached approximately 4.46 billion KRW.
The violations detected this time relate to the unfair termination of existing insurance contracts, which is a type of 'Prohibited Acts Related to Insurance Contract Conclusion or Solicitation.' These occur when insurance agents cancel valid insurance contracts to receive sales commissions and encourage customers to switch to similar new insurance policies.
Among the nine companies caught in the FSS's on-site inspections, Samsung Life Insurance received the largest fine of approximately 2.21 billion KRW. From March 2019 to March 2021, its sales organization, including insurance agents, solicited 114 life insurance contracts and unjustly terminated existing insurance contracts that had expired within six months before or after the application date of the new insurance contract by failing to inform customers of important differences between the old and new contracts.
Mirae Asset Life Insurance was fined 926 million KRW for unfairly terminating existing insurance contracts in 34 life insurance contracts solicited between 2019 and 2021. Additionally, the FSS detected unfair policy replacements in 98 cases at Hanwha Life Insurance and 87 cases at Tongyang Life Insurance, imposing fines of 766 million KRW and 366 million KRW, respectively.
Furthermore, Shinhan Life Insurance was fined 192 million KRW for 58 unfair policy replacement contracts, Heungkuk Life Insurance was fined 52 million KRW for 9 such contracts, and IMLife Insurance was fined 112 million KRW for 5 contracts. In addition, ABL Life Insurance had 3 cases (24 million KRW) and Fubon Hyundai Life Insurance had 1 case (11 million KRW) of unfair policy replacement confirmed.
Meanwhile, Samsung Life Insurance was also sanctioned with a supervisory warning for distorting or omitting important information when selling financial investment products. The FSS imposed disciplinary actions on five related executives and employees, including a three-month salary reduction, cautionary warnings, reprimands, and requirements for voluntary corrective measures.
From November 2017 to March 2020, Samsung Life Insurance incompletely sold 125 fund accounts worth 23 billion KRW to 122 general investors. The total subscription amount reached 22.942 billion KRW. Additionally, sales staff at Samsung Life Insurance branches sold financial investment products worth 700 million KRW to two investors between August and November 2017, violating the suitability principle by obtaining signed seals on questionnaires without the investors’ responses to assess their investment information.
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