Sanctions on Insurance Companies Violating Consumer Rights... Financial Services Commission Establishes Legal Grounds

Approval of the Insurance Business Act Amendment at the Cabinet Meeting

[Asia Economy Reporter Oh Hyung-gil] Financial authorities are establishing legal grounds to sanction insurance companies that may infringe on consumer rights. Insurance companies that do not verify duplicate contracts when soliciting indemnity health insurance will be fined.

The government approved the amendment to the Insurance Business Act containing these provisions at the Cabinet meeting held on the 23rd. The Financial Services Commission plans to submit the amendment to the National Assembly by July.

Previously, two amendment bills to the Insurance Business Act submitted by the Financial Services Commission to the 20th National Assembly were discarded due to the expiration of the session, so the same amendment will be resubmitted.

The Financial Services Commission will first clarify the principle of 'voluntary sales + exceptional reporting' when insurance companies develop insurance products and will promote the abolition of the prior reporting obligation for bancassurance products.

When an insurance company intends to engage in financial business authorized, permitted, or registered under other laws, or when it intends to engage in ancillary business that another insurance company has already reported and is conducting, it will be amended to allow operation without prior reporting.

When establishing a subsidiary, if the insurance company has obtained approval for the establishment of the subsidiary on the condition that it owns the shares, it will no longer need to obtain approval twice. Also, if an asset management company is to be a subsidiary, prior reporting will be changed to post-reporting to enable timely investment.

It will be mandatory to have the adequacy of reserve funds verified by the Korea Insurance Development Institute, which calculates insurance premium rates, or by an external insurance actuary.

A notification obligation will be newly established when transferring insurance contracts. In cases where insurance contracts are transferred to another insurance company due to dissolution or merger, the fact will be individually notified to the policyholders to ensure they can fully exercise rights such as objections.

Additionally, among the 10 reporting items under the Insurance Business Act, four items?ancillary business, subsidiary ownership, basic documents, and reference order insurance rates?will be classified as reports requiring approval, while the remaining six will be classified as reports not requiring approval.

Furthermore, the Financial Services Commission included provisions in this amendment that allow it to request consultations with the relevant departments in charge of mutual aid regarding not only mutual aid products but also financial soundness. If the head of the mutual aid supervisory department deems it necessary to maintain financial soundness, they can consult with the Financial Services Commission on joint inspections.

A Financial Services Commission official stated, "The improvements related to the rationalization of the reporting system will be implemented from the date the amendment is promulgated, and the remaining matters will be implemented six months after promulgation, considering the schedule for amending subordinate laws such as enforcement decrees."

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