Insurance Agency Branch Manager Flees Abroad After Earning High Commissions Through False Contracts

Financial Supervisory Service's Comprehensive Inspection Results on Corporate Insurance Agencies
Detection of False Contracts, Provision of Special Benefits, and Unfair Commission Payments
Weak Control over Illegal Activities Including Violations of Recruitment Order

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] Mr. A, who works as a branch manager at a corporate insurance agency (GA), created multiple false insurance contracts under other agents' names and fled overseas after receiving large initial commissions. Mr. B, an executive of another GA, was caught creating numerous high-value false contracts with monthly premiums of 5 million KRW by registering employees as contract holders to exaggerate sales performance. Another GA agent, Mr. C, colluded with other agents to create multiple false contracts using a pre-secured customer database and resigned after receiving large initial commissions.

Corporate insurance agencies (GAs) specializing in insurance sales have committed violations such as systematically and massively creating false contracts to obtain insurance commissions. Due to weak internal controls within GAs, they failed to self-regulate these illegal activities.

On the 22nd, the Financial Supervisory Service conducted an inspection of the overall operations of three GAs?Leaders Financial Sales, Global Financial Sales, and Taewang Partners?and confirmed large-scale violations of recruitment regulations.

Most large GAs expanded their organizations in a branch-type structure to increase commissions, resulting in very weak internal control functions. Individual branches operated as independent management entities, directly handling all tasks such as organization, personnel, accounting, and fund management without headquarters’ oversight.

There was also a widespread practice of creating false contracts worth tens of billions of KRW to inflate sales figures and embezzle recruitment commissions, which were then used arbitrarily or obtained through arbitrage by canceling insurance after recruitment to claim commissions and surrender refunds.

One agent targeted professionals such as pharmacists with high-value whole life insurance, offering a condition to provide half of the premiums for two years and even paid the premiums on behalf of the clients after contract signing.

Additionally, some GAs awarded overseas trips annually to 600?800 top agents, requesting tens of billions of KRW in travel expenses from insurance companies. In 2018, 620 agents traveled to Guam with travel expenses supported by 28 insurance companies. It was confirmed that insurance companies supported these travel expenses considering the market influence of the GAs.

Notably, 32.9% of the false contracts detected during the inspection period at some GAs involved premium payments made through virtual accounts.

The Financial Supervisory Service decided to promptly proceed with related disciplinary procedures, including review by the disciplinary committee, regarding the regulatory violations identified in this inspection.

A Financial Supervisory Service official stated, "We plan to strictly sanction organized illegal activities by GA executives and repeated violations of recruitment regulations under a zero-tolerance policy. For GAs with poor internal controls or ongoing indicators, we will continue to conduct inspections covering overall operations."

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