FSS Issues Institutional Warning and 100 Million Won Fine to Heungkuk Fire & Marine Insurance for "Bundled Insurance Sales"

Management Advisories Issued to Hyundai Marine & Fire Insurance and NongHyup Property & Casualty Insurance

The Financial Supervisory Service has imposed sanctions, including an institutional warning, on Heungkuk Fire & Marine Insurance for bundling insurance products when signing loan contracts with small and medium-sized enterprises (SMEs) and low-credit borrowers.

According to the financial industry on June 4, the Financial Supervisory Service imposed an institutional warning, a fine of 100 million won, a warning to one executive, and sanctions equivalent to a warning for five retirees for illegal or improper conduct on Heungkuk Fire & Marine Insurance on June 2.

According to relevant laws, insurance companies are prohibited from signing insurance contracts with borrowers or their related parties within one month before or after the execution of a loan contract with SMEs or low-credit borrowers. For other financial consumer loans, if an insurance contract is signed within one month before or after the initial execution of the loan contract, the consumer's monthly insurance premium must not exceed one percent (10/1000) of the loan amount.

The Financial Supervisory Service's inspection revealed that from January 2016 to October 2021, Heungkuk Fire & Marine Insurance signed loan contracts with SMEs and then entered into insurance contracts with the representatives of those SMEs within one month. In April 2016, the company signed a loan contract with a low-credit borrower and entered into an insurance contract within one month. In October 2021, the company signed a loan contract with another financial consumer and received a monthly insurance premium that exceeded one percent (10/1000) of the loan amount by signing an insurance contract within one month. Between July 2021 and January 2023, during the process of screening policyholder loans, the company accessed information on 22 policyholders through its internal IT system for screening purposes unrelated to the insurance or health management service industries.

The Financial Supervisory Service also issued two management advisories each to Hyundai Marine & Fire Insurance and NongHyup Property & Casualty Insurance, stating that both companies need to strengthen internal controls related to insurance solicitation organization training and enhance verification procedures for long-term insurance claim investigation ratios.