Vigilant Watch over 750 Insurance Agencies

The Financial Supervisory Commission (FSC) set preparations for the elimination of the rebate policy of the insurance companies.

FSC revealed its plan to monitor closely the 750 insurance agencies that have been exposed for their rebate policy or charging excessive fees, and will carry out a special investigation on the companies that lack countermeasures to root out the rebate policy.

First of all, after analyzing the actual business expenses of the insurance companies for the past three years, FSC ordered the insurance companies that had spent excessive money for receptions and event fees to present their reports on reduction of business expenses.

According to FSC`s analysis, the amount of actual business expenses that the insurance companies spent extra money for was 288.1 billion won in 1999, 27.0 billion won in 2000, and 41 billion won from April to September of last year, totaling 357.0 billion won for the past two and half years. Most insurance companies except for Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, and Dongyang Fire Insurance spent more on business expenses than planned in the budget.

FSC selected 750 insurance agencies whose sales is over 50 million won per month or over 90 percent of whose total sales are from auto insurance products among insurance agencies that provide rebates to customers or request excessive commissions by agents pretending to sell the insurance products directly, which was actually sold by other small agencies. The number of agencies for each insurance company is 198 for Samsung, 120 for LG, 90 for Hyundai, 85 for Dongyang, 65 for Ssangyong, 56 for Sin Donga, 55 for Dongbu, 46 for Jaeil, 17 for Regent, 11 for Daehan, and 7 for Kukjae.

FSC ordered the agencies to present the sales records every month and that the insurance companies independently examine the situation of rebates and report the results to FSC. In addition, FSC will monitor whether the insurance companies have carried out their plans to remove the rebate policies and, if their efforts to establish countermeasures are lacking, FSC will carry out special inspections.

Judging that the rebates may be provided in the contracts with corporations, FSC will particularly review all the corporate contracts including the contracts with local government organizations.

Byong-Ki Lee eye@donga.com