Digital Insurance and Pet Insurance Regulations, Death Benefit System Reform After the Eunhae Lee Case
Practical Experience in Designating MG Insurance as a Troubled Financial Institution... A Crisis Management Leader
FSC: "The Insurance Division Faces Many Issues and Cannot Remain Vacant for Long"
Industry: "With Challenges Like MG Insurance and GA Commissions, It Is Fortunate to Minimize the Leadership Gap"
With the dispatch of former Insurance Division Director Kim Sungjun of the Financial Services Commission (FSC) to the Presidential Office, Dong Yeop Lee, Acting Director, has returned to the position of Insurance Division Director after more than two years. The insurance industry welcomed the swift appointment of a successor. The return of a veteran is expected to minimize any leadership vacuum, especially as the industry faces sensitive issues such as the resale of MG Insurance and the improvement of commission structures for corporate insurance agencies (GAs).
According to the insurance industry on July 21, Lee is regarded as both a 'strategic leader' who can efficiently handle complex issues and a 'benevolent leader' who trusts and supports both the industry and his subordinates. Having passed the 44th civil service exam, he has served as Head of the Financial Dispute Response Team, Insurance Division Director, and Financial Innovation Division Director. He also has experience seconded to the Bank of Korea, the Office for Government Policy Coordination, and the Korea Insurance Research Institute.
The FSC and the insurance industry highly valued his smooth handling of the death benefit system reform following the Eunhae Lee Gapyeong Yongso Valley murder case. They noted that Lee played a key role in regulatory and institutional reforms by participating in the Financial Regulatory Innovation Council. He also contributed to the advancement of digital insurance systems, such as online insurance product comparison and recommendation. He eased regulations to allow the establishment of specialized subsidiaries for niche areas like pet insurance and travel insurance.
An industry official commented, "He has a gentle personality but is meticulous in his work and delivers results. He has contributed to several insurance system improvements following the Financial Regulatory Innovation Council."
He also achieved notable results in the area of insurance fraud. In particular, when the Eunhae Lee case in 2022 brought the issue of death benefit limits to the forefront, he quickly formed a task force (TF) to respond. He led a pan-government joint investigation team on insurance fraud, which included financial, investigative, and health authorities, as well as the insurance industry. During this process, discussions were held on restricting duplicate subscriptions for indemnity insurance and centralizing the management of insurance credit information for travel insurance.
With the rapid increase in so-called 'Nailonghwanja'?people who feign illness and make excessive insurance claims even for minor symptoms?he also proposed improvements to auto insurance. In January 2023, during his previous term as Insurance Division Director, he suggested introducing a comparative negligence system to auto insurance to address the problem of excessive payouts for minor injuries.
The main issues currently facing the insurance industry include the resale of MG Insurance, the regulation of GA commission payments, and the management of insurers' capital adequacy ratios (K-ICS). At the end of last month, MG Insurance abruptly shifted from its previous plan of liquidation via a bridge insurer to attempting a resale. Lee was the person who led the practical work when MG Insurance was designated as a troubled financial institution in April 2022.
The issue of GA commission payments also remains unresolved. Among insurance planners, it is common practice to receive a lump-sum commission in the first one to two years after a customer signs up for a product. Financial supervisory authorities have identified planners who encourage customers to switch policies after three years as a major cause of market disruption. The authorities initially proposed a seven-year commission payment plan, but due to opposition from GAs, they scaled back to a four-year plan. Recently, however, the GA industry has also opposed this compromise.
Regulatory authorities' direct and indirect support is also needed to strengthen insurers' capital soundness. The first meeting of the Insurance Industry Soundness TF, held by the FSC and the Financial Supervisory Service (FSS) on July 1, focused on aligning the discount rate for insurance liabilities with market realities. At the meeting, the authorities decided to extend the Last Observable Term (LOT) from 20 to 30 years. The LOT refers to the period during which market data, such as government bond yields, are used to apply the discount rate to insurance liabilities. According to the FSS, the K-ICS ratio for insurers in the first quarter was 197.9%, down 8.7 percentage points from 206.7% at the end of the previous quarter, marking a record low.
An industry official stated, "With significant uncertainty surrounding the reorganization of financial authorities, it is fortunate that a reliable leader has returned at a time when stable management of key issues is needed. The industry believes the FSC has swiftly appointed the right person to ensure the stable operation of insurance policies."
An FSC official explained, "Just like the Insurance Division, the Asset Management Division also remains vacant, but given the numerous sensitive issues in the insurance sector, we quickly appointed an acting director for the Insurance Division."
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