Fair Trade Commission fines 8 insurance companies 1.7 billion KRW for collusion on LH rental housing fire insurance

[Asia Economy Sejong=Reporter Dongwoo Lee] Eight non-life insurance companies that colluded as successful bidders in the rental housing insurance bid commissioned by Korea Land and Housing Corporation (LH) have been sanctioned by the Fair Trade Commission (FTC).

On the 24th, the FTC announced that it imposed fines totaling 1.764 billion KRW on eight non-life insurance companies that colluded by participating as mere bidders or by not participating in the LH rental housing insurance bid, and reported KB Insurance and Gonggieop Ins Consulting to the prosecution.

The eight non-life insurance companies involved in the collusion include KB Insurance, Samsung Fire & Marine Insurance, MG Insurance, Hanwha General Insurance, Heungkuk Fire & Marine Insurance, DB Insurance, Meritz Fire & Marine Insurance, and Gonggieop Ins Consulting.

During the 2018 comprehensive property insurance bidding process, KB Insurance and Gonggieop Ins recruited Samsung Fire & Marine Insurance as a mere bidder and caused Hanwha General Insurance and Heungkuk Fire & Marine Insurance to abstain from bidding. As compensation, Samsung Fire & Marine Insurance and Hanwha General Insurance were allowed to acquire part of the shares of the KB joint consortium, the expected successful bidder, through Korean Re (a reinsurance company) via retrocession, and Heungkuk Fire & Marine Insurance participated in the 2018 fire insurance bid with the KB joint consortium.

KB Insurance, which led the collusion, won the LH comprehensive property insurance and fire insurance bids in 2017. However, after suffering approximately 10 billion KRW in damages due to the Pohang earthquake in November 2017, KB Insurance conspired and executed collusion with Gonggieop Ins to win the 2018 bid as well to recover losses. Gonggieop Ins acted as the recruiter for the KB joint consortium and was responsible for recruiting mere bidders.

As a result of the bid, the winning amount of the KB joint consortium increased 4.3 times compared to 2017, and the bid rate compared to the estimated price rose from 49.9% in 2017 to 93.0% in 2019. This is the highest winning amount and bid rate since LH integrated the comprehensive property insurance bidding in 2016. The bid rate fell again to 42.9% the following year.

In the fire insurance bid, Hanwha General Insurance and Meritz Fire & Marine Insurance were made to abstain from bidding, and part of the KB joint consortium’s shares were allocated. MG Insurance also participated in the bid collusion by recognizing Hanwha and Meritz’s abstention and share allocation and joining the KB joint consortium.

As a result, the winning amount increased 2.5 times compared to 2017, and the bid rate sharply rose to 93.7% compared to the previous year.

Accordingly, the FTC imposed fines of 284 million KRW on KB Insurance, 263 million KRW on Gonggieop Ins, 230 million KRW on Samsung Fire & Marine Insurance, 263 million KRW on Hanwha General Insurance, 230 million KRW on Heungkuk Fire & Marine Insurance, 207 million KRW on DB Insurance, 263 million KRW on MG Insurance, and 24 million KRW on Meritz Fire & Marine Insurance.

The FTC stated, "This action is significant in that it uncovered acts where insurance companies provided collusion compensation by acquiring retrocession or forging subscription documents to allocate shares as compensation for mere bidder participation or abstention from bidding."

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