The Financial Supervisory Service reiterated that it would respond to the unsound business practices of corporate insurance agencies (GAs) with a zero-tolerance principle.
On the 3rd, the FSS noted, "Competition in insurance sales is intensifying due to stagnation in the insurance market and the restructuring of sales channels centered around GAs."
The FSS pointed out that issues such as undue transfers, frequent turnover of insurance agents, and declining retention rates have arisen due to excessive advance commissions for agents and GAs at the initial stage of contracts. In the current structure, where performance is swayed by the sales capability of GAs, it is difficult for insurers to exercise management authority over GAs.
The FSS also diagnosed that incomplete sales are occurring due to the distortion of information provided during the insurance contract signing process or lack of proper explanations. Agents have been found to engage in false and fabricated contracts for the purpose of receiving commissions, and some GAs have been implicated in illegal activities such as lending-related practices.
The FSS is preparing a third-party risk management guideline for insurers to enhance the level of risk management in GA sales delegation. In particular, it plans to promote the "GA operational risk assessment system" that evaluates risk management levels, offering incentives to outstanding companies and imposing penalties on those that are inadequate.
Earlier, the financial authorities conveyed precautions to insurance companies and GAs regarding the restructuring of agents and strengthening internal controls in April. The FSS stated, "We will take necessary measures to ensure that the ongoing regulatory improvement matters are swiftly implemented," adding, "We will check whether the insurance industry is faithfully implementing these regulatory improvement measures."