[비즈한국] Life and non-life insurance companies received the most sanctions during financial authorities' inspections in 2024. According to the sanction records, violations were found to occur frequently during the processes of insurance sales and product contracting. Experts point out that larger companies have more violations and a high number of complaints or disputes, suggesting that the industry needs to be more vigilant.
Samsung Life Insurance 9 cases, DB Insurance 7 cases… Sanctions Concentrated on Insurance Companies
As a result of tallying a total of 340 major financial sanction notices disclosed by the Financial Supervisory Service (FSS) from January 1 to December 31, 2024, the financial company that received the most sanctions over the year was Samsung Life Insurance, with 9 cases.
The most frequent reason for sanctions was "violation of the duty to prohibit insurance industry workers from engaging in insurance fraud," accounting for 4 out of the 9 cases. Other reasons included violations of prohibitions regarding the conclusion or solicitation of insurance contracts, incomplete sales of financial investment products, violations of recording obligations, violations of investment advertisement regulations for collective investment securities, violations of prohibitions on promoting specific money trusts, and violations of insurance premium calculation principles and document management standards.
Among the violations, there were cases where insurance contracts were processed without the consent of the actual policyholder. An insurance planner at a branch in Yeosu was fined for soliciting 3 insurance contracts without the policyholder's consent between May and August 2023.
There was also a case of incomplete sales occurring between November 2017 and March 2020, where incorrect investment prospectuses were distributed at branches while selling approximately 23 billion KRW worth of funds, leading to the distortion or omission of important product details. On November 27, the financial authorities issued a disciplinary warning to the institution and took measures such as salary cuts, warnings, and reprimands against the employees involved.
Following Samsung Life Insurance was DB Insurance005830, which received 7 sanctions throughout the year. Out of the 7 cases, 3 were for "violation of the duty to prohibit insurance industry workers from engaging in insurance fraud," and 2 were for "violation of prohibitions regarding the conclusion or solicitation of insurance contracts." The remaining 2 cases involved violations of the duty to comply with retirement pension contract details and violations of insurance premium calculation principles and document management standards. These 2 cases also led to institutional sanctions, with fines of 74 million KRW and 200 million KRW imposed, respectively.
In the case where a 200 million KRW institutional fine was imposed, it was confirmed that in 2016 and 2020, during the process of calculating insurance premiums and risk rates for 79 types of insurance products, DB Insurance had calculated excessive premiums or used risk rates that were higher than actual levels to develop the products.
Besides Samsung Life Insurance and DB Insurance, all companies that received 5 or more sanctions were also insurance companies. Samsung Fire & Marine Insurance000810, Hanwha Life Insurance088350, and Hyundai Marine & Fire Insurance001450 each recorded 6 cases, while Shinhan Life Insurance recorded 5 cases. In the case of Hanwha Life Insurance, 5 out of the 6 cases resulted in institutional sanctions, and on November 25, 2024, a staggering 766 million KRW in penalties was imposed. This was due to the discovery that they had manipulated their computer system between March 2019 and May 2021 to unfairly terminate existing insurance contracts. Shinhan Life Insurance was also imposed with an institutional penalty of 192 million KRW on the same day for the same reason as Hanwha Life Insurance.
Top Insurance Companies Also Lead in Complaints
What is noteworthy is that the insurance companies that received multiple sanctions from financial authorities also had high numbers of customer complaints. Complaints occurred more frequently at larger companies, suggesting that violations occur often during the process of aggressive insurance contracting and solicitation.
According to the Life Insurance Association's consumer disclosures, Samsung Life Insurance had 973 complaints as of the third quarter of 2024, the highest among 22 life insurance companies. Hanwha Life Insurance followed with 637 cases. Both figures are well above the industry average (189 cases). Samsung Life and Hanwha Life are considered part of the "Big 3" in the life insurance industry (Samsung, Kyobo, and Hanwha Life).
Shinhan Life Insurance, which received 5 sanctions, is a fast-growing company and also showed a high rate of complaints. As of the first half of 2024, when converted to the number of complaints per 100,000 contracts held, it recorded 9.7 cases (622 complaints), surpassing the Big 3 to record the highest figure.
The Citizens' Coalition for Consumer Sovereignty, while announcing the results of the survey on life insurance company complaints and incomplete sales in the first half of 2024, pointed out, "The life insurance industry encounters the most customers through whole life insurance and planner channels, yet they do not provide sufficient information about products to customers. This leads directly to consumer dissatisfaction. Sales-related complaints are the main cause, accounting for nearly half of all complaints."
The non-life insurance industry showed a similar pattern. DB Insurance had 1,698 complaints in the third quarter of 2024, the second highest after Hyundai Marine & Fire Insurance (1,732 cases). Samsung Fire & Marine Insurance also ranked 3rd with 1,643 cases. All three companies are in the "Big 5" of the non-life insurance industry (Samsung, DB, Meritz, Hyundai, and KB). As of 2023, the complaint ratio of these three companies is significant, accounting for approximately 48% of the total for non-life insurance companies.
Kang Hyung-gu, Vice President of the Korea Finance Consumer Federation, analyzed, "Consumers who visit banks usually sign up for products themselves to increase their assets, but insurance is meant to prepare for uncertain risks, so consumers' will to sign up is relatively weaker." He added, "Due to this nature of the industry, insurance companies aggressively induce consumer sign-ups, and in that process, violations frequently occur."
Vice President Kang continued, "The high number of complaints is because the interests of consumers and insurance companies differ. Ultimately, it is important for consumers to properly verify contract details before signing up. Insurance companies need to operate systems like medical advisory services in a more transparent manner," he pointed out.