Financial Incidents Involving Agents and Employees... Insurance Companies' Internal Controls with Gaps

Forgery of Documents to Fraudulently Obtain Insurance Premiums

Loans Also Taken Using Copies of Customer IDs

Increase in Fines and Lawsuits Filed

[Asia Economy Reporter Oh Hyung-gil] Financial accidents caused by insurance company-affiliated agents and employees have been repeatedly detected. There are calls for a thorough inspection to determine whether internal controls within insurance companies are being properly implemented.

According to the insurance industry on the 7th, Agent A, affiliated with Hanwha General Insurance's agency, forged documents from November 2016 to June last year to embezzle insurance premiums and refund payments from customers and the company. The estimated loss amount is about 360 million KRW. Hanwha General Insurance has filed a criminal complaint against Agent A for forgery of private documents and fraud and plans to seek compensation for the loss amount.

Mirae Asset Life Insurance also recently disclosed that Agent B, affiliated with the company, was caught deceiving contract holders from July 2015 to September 2017 by promising high-interest returns if they provided funds for fund investments, thereby receiving investment money. As a result, the related agent was dismissed at the end of last year, and the manager was reprimanded.

Additionally, Mirae Asset Life Insurance confirmed that Mr. C, the representative of an insurance agency (GA) partnered for product sales, did not actually conduct business in 2017 but forged contracts to embezzle commissions. They have recovered part of the approximately 370 million KRW loss, filed a police complaint against Mr. C, and are preparing a lawsuit. Internally, they decided to strengthen controls over GA management and supervision.

NongHyup Life Insurance also detected that Mr. D, a local NongHyup employee, used copies of customers' identification cards to obtain insurance policy loans and mid-term loans from December 2013 to February 2016.

The embezzlement by this local NongHyup employee was reported to the NongHyup Central Association, which filed a lawsuit against the local NongHyup for damages based on the business consignment contract and employer liability for illegal acts, winning partial compensation.

The-K Non-Life Insurance confirmed at the end of last year that Mr. E, head of the asset management team, executed loans for real estate development projects in 2017 and 2018 without including key collateral preservation measures or credit enhancements. The estimated loss amount is 2.219 billion KRW. The-K plans to file criminal charges against Mr. E for breach of trust, bribery, and forgery of private documents, as well as initiate civil litigation.

Some insurance companies have also been fined by financial authorities. DB Insurance recently received an 8 million KRW fine and an 84 million KRW penalty after the Financial Supervisory Service found violations related to prohibited acts in insurance contract solicitation and improper consent procedures for the use of personal credit information during a partial inspection in 2018. Heungkuk Fire & Marine Insurance was also fined 35 million KRW last month by the Financial Services Commission for unfair insurance contract replacement practices.

Voices calling for strengthened internal controls are emerging within the insurance industry. An industry insider said, "There is a need to further strengthen internal monitoring systems to minimize financial accidents," but also lamented, "However, it is true that it is not easy to prevent illegal acts individually committed by some agents or employees."

This content was produced with the assistance of AI translation services.