Heungkuk Fire&Marine Insurance received disciplinary action from the Financial Supervisory Service for engaging in sales known as 'loan flipping (restrictive insurance contracts)' which involved providing loans to small and medium-sized enterprises and individuals with low credit ratings.
According to financial authorities on the 4th, the Financial Supervisory Service recently imposed a fine of 1.1 billion won on Heungkuk Fire&Marine Insurance along with an institutional caution. Additionally, one executive received a 'warning,' while five retirees faced sanctions for 'illegal and unjust matters (serious caution).'
The Financial Supervisory Service found that Heungkuk Fire&Marine Insurance entered into loan contracts with small and medium-sized enterprises and individuals with low credit ratings from 2016 to 2021, and signed critical insurance contracts within one month before and after these contracts. Under current law, insurance companies are prohibited from entering into critical insurance contracts with borrowers (loan recipients) and related parties within one month before and after entering into loan contracts.
This regulation aims to prohibit financial companies from providing loans to small and medium-sized enterprises and individuals with low credit ratings, encouraging them to reinvest a portion of the loan into deposits, insurance, or financial investment products.
Heungkuk Fire&Marine Insurance also engaged in loan flipping with general subscribers. For general financial consumers, they should not enter into insurance contracts where the monthly premium exceeds 1% of the loan amount within one month before and after entering into a loan contract. Heungkuk Fire&Marine Insurance violated this in 2021 by signing contracts with customers where the monthly premium exceeded 1% of the loan amount.
The Financial Supervisory Service also confirmed that Heungkuk Fire&Marine Insurance illegally accessed customer information. Between 2021 and 2023, while conducting loan assessments, the company improperly inquired about the personal information of 22 individuals, including diagnosis names, treatment periods, hospital names, and details of insurance incidents that included disease and injury information. The Financial Supervisory Service explained that Heungkuk Fire&Marine Insurance did not impose differentiated access rights to employee information based on their roles, allowing even loan assessment personnel to view this information.
The Financial Supervisory Service noted, 'Heungkuk Fire&Marine Insurance did not properly conduct checks to ensure that employees complied with credit information protection laws.' It added that 'technical, physical, and managerial security measures for the credit information computer system were not implemented.'
Meanwhile, this disciplinary matter was discovered during an inspection by the Financial Supervisory Service in April 2023. There are also concerns that the detection of legal violations from 2016 during this inspection may indicate a decline in the inspection capabilities of the Financial Supervisory Service.
Financial authorities report experiencing difficulties in inspections due to a lack of inspection personnel and the sophistication of financial crime methods compared to the past. It takes considerable time for them to analyze inspection results and determine sanctions for violations. From the conclusion of an inspection by the Financial Supervisory Service to the completion of processing, it can take as long as two years.
Professor Ko Dong-won of Sungkyunkwan University stated, 'Those working in the financial industry have significant complaints about the lack of professionalism and inefficiency of supervisory authorities,' and added that 'these issues need to be improved systematically.' He also suggested the need for a system to implement supervisory evaluation committees to review consumer damage cases and independently assess supervisory agencies.