The Financial Supervisory Service (FSS) conducted inspections on seven major general insurance agencies (GAs) that made excessive payments for settling agents, revealing that 408 agents unjustly terminated 2,984 existing contracts and signed new contracts over the past two years. The FSS determined that this unjust conversion was due to excessive settling payments and emphasized that it would monitor the payment amounts continuously while strictly penalizing any unjust conversions.
According to financial authorities on the 21st, the settling payments made by GAs in the first quarter of this year amounted to 100.3 billion won, an increase of 19.7% compared to the previous quarter (83.8 billion won). Notably, the payment amount for large GAs with over 500 agents rose from 80.5 billion won to 98 billion won during the same period.
Financial authorities have judged that GAs' excessive settling payments during the recruitment process of agents led to adverse effects such as unjust conversions. Agents who receive a large sum in settling payments are likely to cancel existing contracts of customers and enroll them in new products to meet their new contract performance targets.
According to the FSS investigation, all 408 agents who committed unjust conversions canceled insurance contracts they had directly recruited and signed new insurance contracts with similar coverage, but failed to inform customers of important details. If existing contracts that were terminated within six months before or after the signing of a new contract were not disclosed, it would be deemed an unjust conversion.
Among the 2,984 unjust conversions, particularly 43.1% (1,286 cases) occurred within 180 days of the agent's transfer to a new GA. The data showed that 64.3% of unjust conversions occurred within one year, 90.4% within two years, and 98.8% within three years. Some agents were found to have engaged in practices such as offering special benefits that included financial incentives for signing new products and creating false or fabricated contracts. The FSS pointed out that "it is significantly concerning that new contracts are being signed based on agents' performance rather than customer needs, which undermines the rights of insurance consumers."
Financial authorities decided to promptly conduct on-site inspections of GAs that disrupt market order by causing unjust conversions due to excessive settling payments. Additionally, GAs found to have engaged in unjust conversions will face increased institutional sanctions, including administrative suspension and exclusion from the application of maximum fine amounts, thus imposing the maximum penalties under the law. It aims to eliminate the practice of imposing fines and business suspensions solely on the agents involved in unjust conversions.
Notably, starting in 2022, the evaluation of 'internal control operation status of large GAs' will include compliance with insurance regulations regarding settling payments. The FSS stated, "We will conduct on-site inspections promptly for GAs that disrupt market order by causing unjust conversions due to excessive settling payments."