TONGYANG Life Insurance is expected to face a penalty surcharge of 150 billion won for allegedly providing personal information to a third party without customer consent, heightening concerns in the insurance industry. The issue arose from TONGYANG Life Insurance sharing customer information it collected and retained with its subsidiary-type insurance agency (GA) for sales, which has been a longstanding practice in the insurance sector, leading to forecasts of potential additional sanctions.
According to the insurance industry on the 14th, the Financial Supervisory Service has reportedly decided to impose a penalty surcharge of 150 billion won on TONGYANG Life Insurance for violating the Credit Information Law. The law states that if personal credit information is provided to a third party without customer consent, a penalty surcharge may be levied up to 3% of the total revenue. Last year, TONGYANG Life Insurance's revenue (net insurance premiums) was 4.75 trillion won, making the 3% amount 142.5 billion won. The exact penalty surcharge will be determined by the final decision of the Financial Services Commission.
Under current laws, collecting and using personal information, as well as providing it to third parties and utilizing it for marketing, requires separate consent. For TONGYANG Life Insurance to use the customer information it has acquired with consent for sales by providing it to its subsidiary GA, additional consent for providing information to third parties is required.
If the penalty surcharge amount for TONGYANG Life Insurance is confirmed as is, a significant blow is unavoidable. TONGYANG Life Insurance's net profit for the first half of this year was 86.8 billion won, a decrease of 47.1% compared to the same period last year. The 150 billion won penalty surcharge is approximately 1.7 times this year's net profit.
After determining the penalty surcharge amount for TONGYANG Life Insurance, financial authorities are expected to decide on the investigations and penalties for Shinhan Life and Lina Life, which are facing similar allegations. Using the same criteria as TONGYANG Life Insurance, Shinhan Life could face a maximum penalty surcharge of 210 billion won, while Lina Life may incur a penalty surcharge of 96 billion won.
The insurance industry anticipates that this sanction will have widespread effects on overall insurance sales practices. Until now, most subsidiary-type GAs have relied on databases (DB) containing customer personal information provided by insurers for sales. It hasn't been a significant issue whether the provided DB had obtained consent for third-party information provision or if using this DB violates the Credit Information Law.
As investigations regarding potential violations of the Credit Information Law expand across the insurance industry, the strengthening of personal information management and supervision could greatly impact small and medium-sized GAs that depend on customer DBs. In insurance sales, customer DBs are one of the key factors that determine sales effectiveness, as having a better DB can lead to securing more contracts. Some GAs attract insurance planners by claiming to offer high-quality DBs that differentiate them from others.
An official affiliated with the GA industry noted, "Many subsidiary-type GAs have utilized insurers' DBs, and if TONGYANG Life Insurance encounters issues, other insurers may also face problems," adding, "It will be crucial in the future where to secure DBs for sales if it becomes difficult for subsidiary-type GAs and most GAs to receive DBs."
Some observers express hopes that this sanction will raise awareness regarding personal information management in the insurance industry. In the GA sector and other insurance sales environments, trafficking in customer personal information has become commonplace. Lists of customers who consented to consultations or applied for insurance consultation can be traded for amounts reaching hundreds of thousands of won, depending on the likelihood of securing insurance contracts. There are specialized companies that collect personal information to sell customer DBs to GAs.