Governor Lee Chanjin Meets with CEOs of 16 Insurance Companies
Reiterates the Importance of Consumer Protection
Calls for Expanded Investment in SOC and ESG Sectors
Lee Chanjin, Governor of the Financial Supervisory Service, met with the CEOs of major insurance companies on September 1 and urged them to strengthen consumer protection. He also requested that they expand investments in social overhead capital (SOC) and the fields of environmental, social, and governance (ESG).
On this day at 3:00 p.m., Governor Lee held his first meeting since taking office with the CEOs of 16 life and non-life insurance companies, as well as Kim Cheolju, Chairman of the Korea Life Insurance Association, and Lee Byungrae, Chairman of the General Insurance Association of Korea, at the Center Point Gwanghwamun Building in Jongno-gu, Seoul.
Governor Lee emphasized that the insurance industry has made significant contributions to the development of domestic industries by consistently providing long-term capital essential for corporate growth and building social infrastructure. He also delivered several requests necessary for the insurance industry to maintain sound growth and continue earning the trust of consumers in the future.
Governor Lee stressed the need to internalize a culture of financial consumer protection. He said, "To restore consumer trust, it is essential for top management to internalize an organizational culture that prioritizes the consumer's perspective," adding, "Poor insurance product design can cause consumer harm and distort the healthcare system, so a proactive consumer protection system must be strengthened from the product design and review stages." He continued, "The scope of coverage must be clearly presented and sufficiently explained to consumers in order to enhance the objectivity and reliability of insurance payouts," and explained, "If internal controls related to product development are not implemented, we will take action according to a zero-tolerance policy."
He also called for efforts to maintain financial soundness. Governor Lee stated, "The soundness of the insurance industry is generally satisfactory, but volatility could increase significantly due to factors such as falling interest rates," and urged, "Please manage risks at an appropriate level through your own financial impact analyses and proactive asset-liability management (ALM)."
Governor Lee explained that while the pace of discount rate adjustments would be controlled, the basic approach to interest rate risk management, such as establishing a 'duration gap' standard, would continue. He also said that for the 'K-ICS (Korean Insurance Capital Standard) regulatory framework' currently being introduced, the authorities are considering measures for a soft landing, such as providing sufficient preparation time.
Governor Lee also called for the establishment of a fair market order. He pointed out that excessive sales competition and product concentration since the implementation of International Financial Reporting Standards (IFRS17) have led to consumer harm, such as misselling, and stated that strict controls over sales commissions must be established and the management system for sales outsourcing should be strengthened to prevent destructive competition. Governor Lee said, "The Financial Supervisory Service will focus all available supervisory and inspection resources to fundamentally address widespread issues in the insurance market, such as consumer harm from unsound business practices and poor internal controls. We will hold not only the individuals involved but also top management accountable," adding, "We will also swiftly implement institutional reforms to establish market order, including sales commission restructuring and the introduction of third-party risk management guidelines."
Governor Lee also emphasized the social responsibility of the insurance industry. He said, "Please expand funding for productive finance in areas such as high-tech industries and social overhead capital, as well as investments linked to ESG. The insurance industry's interest in inclusive finance for vulnerable groups is also needed."
The CEOs of insurance companies expressed their gratitude for the financial authorities' efforts to restore consumer trust and rationalize regulations. They agreed that the industry must address various problems caused by excessive sales competition and a focus on short-term profits. They pledged that, going forward, top management would strive to internalize an organizational culture that prioritizes the consumer perspective within the insurance industry.
Governor Lee plans to actively reflect the suggestions and issues discussed at this meeting in future supervisory and inspection work.
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