CEOs of Insurance Companies Urged to Resign

Exceptional heavy penalty of `urge to resign` was imposed to the representatives of insurance companies, which offered rebates.

The Financial Supervisory Commission (FSC) decided on the 24th to punish Ssangyong Fire & Marine Insurance with urging the representative to resign, censure level warning, suspension of business license for 4 branch offices, saying, “it offered clients rebates amounting 2,100 million won for subscribing. ”

In addition, FSC punished 39 executives from 8 insurance firms including Ssangyong, Samsung, First and Dongbu Fire & Marine Insurances with urging to resign, dismissal from the post, suspension from duty, or censure for offering rebates, 2 branch offices with cancellation of registration, and 23 branch offices with suspension of business license.

According to FSC, Ssangyong Fire & Marine Insurance offered the 4510 clients with filling tickets worth of 255 million won or cash from December last year till February this year. FSC caught that the company collected 7.8 billion won for sale promotion fund by fabricating documents, and distributed 6.6 billion won and filling tickets worth 800 million won to branch offices. Shin Dal-Soo head of the Insurance Supervisory Policy Division at the FSC said, “3 executives embezzled 200 million won out of the secret fund. ”

A branch office of Samsung Fire & Marine Insurance was revealed to have offered rebates of 1,300 million won collecting 2050 subscribers for long-term accident insurance. FSC disclosed that 1,600 won was illegally paid for a certain branch office that had received 4,570 contracts of automobile insurance.

Ssangyong, First, and Dongbu insurances illegally discounted 1.8 billion won from premiums, and lots of branch offices let unlicensed insurance salespersons attract customers.

Chung Jae-Wook researcher of Korea Institute of Finance said, “the tradition of rebates would not disappear unless the government treats it with heavy punishment like censure of representatives. The government should control the business of corporations, whose rebates are far larger than the private business subjects. ” Chung has submitted a research report to Korea Independent Commission Against Corruption that the amount of rebates in insurance business reaches 700 billion won.

Dong-Won Kim Seung-Ryun Kim daviskim@donga.com srkim@donga.com