Government Launches Inspection of Insurance Agencies over Alleged Misappropriation of Care Facility Funds through Whole Life Insurance

Inspection of Alleged Misappropriation of Operating Funds
Strict Response to Unfair Practices by Insurance Agencies

The government has launched a fact-finding investigation into allegations that operators of long-term care facilities nationwide misappropriated operating funds by depositing them into whole life insurance policies and then collecting the surrender value. In addition, it will conduct intensive inspections of unfair sales practices by insurance agencies (GA) during the insurance solicitation process.

The Financial Services Commission, the Financial Supervisory Service, and the Ministry of Health and Welfare announced on April 16 that they will conduct a comprehensive survey of the current status of whole life insurance subscriptions, designating representatives and other individuals as policyholders, at more than 30,000 nonprofit long-term care institutions nationwide. The authorities will also conduct related inspections in parallel.

Through this process, they will focus on inspecting any violations of the Financial Consumer Protection Act and the Insurance Business Act during the insurance solicitation process, as well as unfair business practices by insurance agencies.

According to media reports, some care facilities, after receiving consulting services from insurance agencies that also operate as tax accounting firms, are suspected of paying operating funds as premiums for whole life insurance. They allegedly changed the policyholder to the facility representative or another individual and then collected the surrender value, thereby misappropriating the funds.

The Financial Supervisory Service plans to thoroughly inspect the current status of whole life insurance subscriptions in relation to the alleged diversion of operating funds into insurance premiums and their private misappropriation. If any illegalities are identified, the authorities will impose strict sanctions and work together with relevant ministries to improve the system and eliminate unfair business practices.

To address the issue of inappropriate whole life insurance subscriptions, the Ministry of Health and Welfare will re-issue guidance this month to local governments and relevant associations nationwide, stating that whole life insurance policies cannot be purchased for the purpose of retirement allowance accumulation. The ministry will also clearly reflect this policy in its guidelines for elderly health and welfare projects to prevent confusion in the field.

Furthermore, starting in May, local governments will cooperate to conduct fact-finding investigations targeting facilities suspected of inappropriate whole life insurance subscriptions. For facilities found to be in violation, corrective orders will be issued for violations of financial and accounting standards. If these orders are not followed, administrative sanctions will be imposed, including up to the cancellation of facility designation, to thoroughly prevent the leakage of public funds.

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