[First Day of the Financial Consumer Protection Act] "Contract Cancellations May Surge" Insurance and Card Sectors with Many Complaints Suffer Sales Contraction

Easier Insurance Contract Withdrawal
If Sales Regulations Are Violated
Cancellation Can Be Requested Within 5 Years from Contract Date

[Asia Economy Reporters Oh Hyungil and Ki Hayoung] Choi Seokho (33) recently received an absurd phone call from an insurance planner. The planner explained the cancer insurance Choi had subscribed to and recommended a product that offers more coverage for a lower premium. The problem was that the planner had already designed and reviewed insurance using Choi’s personal information. Choi’s mother had received a consultation after watching an insurance remodeling broadcast, but the planner used personal information without permission. Only after Choi filed a complaint with the Financial Supervisory Service did the planner notify that the design details and personal information would be deleted. He expressed his frustration, saying, “It is outrageous that there was no apology for using personal information without consent, and the planner’s excuse that the review is not problematic unlike credit information inquiries is simply absurd.”

With the Financial Consumer Protection Act (FCPA) coming into effect on the 25th, the insurance and card industries, which have many complaints, are worried that their sales might shrink. There is concern that contract cancellations could surge amid significant distrust caused by chronic issues such as incomplete sales.

According to financial authorities and related industries, the Financial Supervisory Service sent an opinion letter to the insurance industry the day before, stating that even if the FCPA contents cannot be included in insurance contracts, no enforcement actions will be taken for the next six months.

The insurance industry believes that since institutional measures such as signatures or recordings have long been introduced at the insurance contract stage to prevent incomplete sales?more so than other financial sectors?there will be no immediate major changes. However, they remain cautious about the introduction of the right to cancel illegal contracts, as easier contract cancellations could lead to an increase in terminations. Under the FCPA, if a seller violates sales regulations, consumers can request contract cancellation within five years from the contract date or within one year from the date they become aware of the violation.

It is pointed out that how well sales regulation compliance is implemented across various insurance sales channels such as corporate agencies (GA), telemarketing (TM), and bancassurance is crucial. In particular, home shopping insurance broadcasts have a significant level of contract cancellations due to incomplete sales.

Among GAs that sold life insurance last year, home shopping had the highest number of withdrawal cases. Of the 120,000 life insurance and 50,000 non-life insurance policies sold by Hyundai Home Shopping, 18,877 and 5,928 contracts were withdrawn mid-term, respectively. CJ ENM also had 13,788 life insurance and 3,049 non-life insurance cancellations, and GS Home Shopping and Lotte Home Shopping (corporate name Woori Home Shopping) each had over 10,000 insurance contract cancellations. With the recent increase in broadcasts promoting insurance consultations, concerns about incomplete sales are growing further.

The card industry, although having relatively less complex product structures compared to other financial sectors, also expects overall sales activities to contract due to the FCPA. Since financial companies must prove intentional or negligent liability for products such as card loans, cash advances, and revolving credit under the FCPA, they admit they have no choice but to conduct sales activities as conservatively as possible.

A card industry official said, “Contents that were not regulated under the Credit Finance Act are now broadly applied to card company sales activities through the enforcement of the FCPA, so sales activities will inevitably shrink for the time being. The lack of a hierarchical legal system under the FCPA and the high uncertainty in legal interpretation conflicts are also problematic,” expressing concern.

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