FSS Issues Management Attention Sanction to Shinhan Life for "Insufficient Internal Control Procedures"

Numerous Issues Identified Through Regular Inspection
Fines and Penalties Totaling 138 Million Won Imposed

The Financial Supervisory Service (FSS) has issued a management attention sanction against Shinhan Life due to insufficient internal control procedures. Shinhan Life was also fined and penalized a total of 138 million won for improper insurance payouts and non-compliance with policy terms.

On July 15, the FSS announced that it had identified 12 management attention items and 18 improvement items during its regular inspection of Shinhan Life, and had notified the company of the inspection report on July 10.

The FSS pointed out that Shinhan Life's management of policy loans was inadequate, and demanded that the company strengthen its internal controls by establishing relevant standards. After the company was formed through the merger of Shinhan Life and Orange Life in 2021, the structure of policy reserve funds by applied interest rate was changed. However, the appropriateness of the applied interest rates for policy loans was not properly reviewed.

The FSS also indicated that customer information management needed to be strengthened. During the past merger process, Shinhan Life failed to verify customer resident registration numbers, resulting in errors in the resident registration numbers of 15,362 customers. The FSS criticized the company for lacking sufficient procedures for verifying and validating customer information.

Management of customer consent information for marketing purposes was also found to be insufficient. Even after the validity period for marketing consent expired, some contracts were still managed as if consent was valid. In addition, the company failed to revoke consent after the agreed period had passed, raising concerns that customer information could be used for marketing without proper consent. The FSS recommended that the company improve its management system regarding marketing consent.

Other areas for improvement were also recommended, including insufficient notification of delays in insurance payment processing, inadequate measures to prevent omitted insurance payments, weak internal controls over insurance product education and informational materials, insufficient asset soundness classification, and inadequate operation of customer verification systems.

Separately, the FSS disclosed major sanctions including fines and disciplinary actions for executives and employees, which were notified after the regular inspection. Following the inspection, the FSS imposed an institutional warning on Shinhan Life, a fine of 84 million won, a penalty of 54 million won, a 60-day business suspension for one insurance planner, and warnings for three executives and employees.

According to the FSS, between March 18, 2019 and February 2, 2023, Shinhan Life underpaid a total of 7.19 million won in insurance benefits for 59 cases by applying an interest rate for additional interest that differed from that specified in the insurance policy terms. In addition, between May 10, 2019 and October 27, 2023, the company failed to process premium payment exemptions for 18 insurance contracts as stipulated in the policy terms, resulting in an excess collection of 47.15 million won in premiums.

It was also found that a former Shinhan Life insurance planner paid premiums on behalf of a policyholder 15 times, providing a total of 45 million won in special benefits. Insurance planners are prohibited from providing special benefits to policyholders or insured persons in connection with the conclusion and solicitation of insurance contracts, but this rule was violated.

Other violations included failure to comply with documentation requirements for basic documents (improper insurance payment processing), failure to report and disclose transactions with major shareholders, failure to report large cash transactions, and violations of obligations to ensure the security of electronic financial transactions such as program change controls.

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