The Financial Supervisory Service will overhaul executives' key performance indicators (KPI) in the insurance industry from short-term results to a focus on mid- to long-term performance to curb excessive competition.
The Financial Supervisory Service said on the 9th that it held a "workshop on improving performance evaluation practices at insurance companies" for executives of insurers and insurance associations and discussed directions for improving performance evaluation practices.
The Financial Supervisory Service (FSS) noted that despite efforts to improve the system, cases that trigger excessive competition and consumer harm continue to recur. The FSS said that short-term performance-driven management practices—such as excessive business expense spending, sales of high-refund, short-payment whole life policies, and optimistic actuarial assumptions—undermine market trust, identifying a short-term performance-centered evaluation system as the root cause.
The Financial Supervisory Service (FSS) recently reviewed the lifecycle KPI operating systems for CEOs and executives at major insurers and found examples of short-term results-centered evaluation systems, a lack of incentives for sound mid- to long-term management, and the formal design and operation of consumer protection performance.
Based on the findings of this review and overseas cases, the Financial Supervisory Service (FSS) plans to supplement the "best practices for executive compensation systems." Going forward, through CEO meetings and other channels, it will encourage the establishment of performance evaluation systems from a mid- to long-term perspective and promote voluntary improvements. It also urged strengthening consumer protection indicators in key executives' KPIs while refraining from performance indicators that conflict with consumer interests.
Deputy Governor Park Ji-seon said, "A company's KPIs are the foundation for embedding its management philosophy and goals into its organizational culture," adding, "Please design performance evaluation systems that balance sustainable growth, financial soundness, and consumer interests from a mid- to long-term perspective."