Fake Contracts and Insurance Company Bullying... The True Face of Corporate Insurance Agencies (Comprehensive)

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 Such as Violations of Recruitment Order

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

GAs specializing in insurance sales were found to have engaged in violations such as systematically and extensively creating false contracts to claim insurance commissions. Furthermore, investigations revealed frequent unethical sales practices, including bullying insurance companies into covering overseas travel expenses for top insurance agents by leveraging their strong influence. Due to weak internal controls within GAs, they failed to regulate illegal activities.

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

A GA refers to an agency that signs contracts with insurance companies and specializes in selling insurance. They can sell insurance products from all life and non-life insurance companies.

Most large GAs expanded their organizations into branch-type structures 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 a prevalent practice of creating false contracts worth tens of billions of KRW to overstate sales and embezzle recruitment commissions, which were then arbitrarily used or exploited 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 cover half of the premiums for two years and even paying the premiums after contract signing.

Additionally, some GAs awarded overseas trips annually to 600?800 top agents and demanded 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.

The FSS pointed out, “GA headquarters perform nominal compliance monitoring without substantial sanction authority, lacking control functions over illegal acts by branches or employees,” and noted that “one mega GA had only two compliance monitoring personnel at headquarters.”

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

The FSS decided to promptly proceed with related disciplinary procedures, including review by the Sanctions Committee, regarding the regulatory violations identified in this inspection.

An FSS official explained, “We plan to strictly sanction organized illegal activities by GA executives and repeated violations of recruitment regulations under a zero-tolerance policy,” adding, “We will continue inspections covering overall operations for GAs with poor internal controls or ongoing indicators.”

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