The Financial Supervisory Service is pushing a plan to have insurers directly assess the internal controls of corporate insurance agencies (GA·General Agency) to which they outsource sales. In this process, if an assessment is insufficient or a GA is deemed to pose management risk (risk factors), the original insurer will face disadvantages when calculating its solvency ratio (K-ICS·K-ICS).
According to the financial authorities on the 9th, the Financial Supervisory Service (FSS) plans to meet with the insurance industry in the first half to draw up indicators for evaluating GA internal controls. Quantitative indicators are expected to include standards related to misselling, policy retention rates, and IT security. Non-quantitative indicators are expected to include whether directives from the financial authorities for improving internal controls and the like were promptly reflected. As consumer harm cases such as illegal fundraising have continued in the GA industry recently, the authorities are preparing countermeasures.
Insurers must directly inspect the operational status of the GAs to which they outsource sales based on the evaluation indicators. The Financial Supervisory Service (FSS) plans to apply disadvantages to K-ICS if an insurer's assessment is inadequate or if a GA is deemed to have failed to meet the relevant standards.
K-ICS is the value obtained by dividing available capital by required capital, and when calculating the original insurer's required capital, a method is being considered to increase the amount by reflecting whether the GA entrusted with outsourced sales poses risks. Required capital is the capital that must be set aside in advance to reflect risks that may arise from interest rates, stock prices, and the like, and available capital refers to the capital actually held by the insurer.
GAs have grown rapidly recently by comparing and selling products from various insurers, but weak internal controls have led to a string of financial crimes. According to the North Chungcheong Provincial Police Agency on Feb. 11, police have booked without detention and are investigating insurance agents affiliated with Incar Financial Service on suspicion of violating the Act on the Prevention of Insurance Fraud. Police believe that more than 20 people, including executives of the Incar Financial Service Hybrid Cheongju branch and agents, colluded with a specific dental clinic to induce patients to enroll in insurance and siphoned off about 2 billion won in insurance payouts.
An official at the Financial Supervisory Service (FSS) said, "We intend to draw up an assessment in a direction that can minimize risks when insurers outsource sales to GAs."