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Banks, “Buy Insurance if You Want to Take out a Loan”

Posted February. 25, 2005 22:57,   


Mr. A, a self-employed worker (45), took out a loan of 35 million won from a bank last year to use it as business operation capital.

Yet, he had to somewhat grudgingly buy savings insurance and pay a monthly premium of 500,000 won because the teller at the bank threatened him, “I have not met the insurance sales quota allotted to me.” He said. “The teller told me, ‘I cannot help you take out a loan unless you buy insurance.’”

The bank is among a group of eight banks that have been reprimanded for tying insurance sales to lending money to their customers or for making their unqualified workers sell insurance.

The Financial Supervisory Commission on February 25 ordered two Hana Bank branches that violated the Bancassurance regulations to suspend their insurance sales for 30 days.

Moreover, it imposed negligence fines of 10 million won on each of the eight banks, including Kookmin Bank, Woori Bank, Hana Bank, Shinhan Bank, Chohung Bank, Korea Exchange Bank, Citibank, and Industrial Bank of Korea.

In the meantime, the financial agency demanded four banks, including Kookmin Bank, Hana Bank, Chohung Bank and Industrial Bank of Korea, to rebuke the members of their staff responsible for the incident.

Behind its decision to punish seven private banks out of eight, excluding Korea First Bank, lie banks’ bold and frequent illegal sales of insurance in the face of fierce competition to have a bigger share in the Bancassurance market.

The following is a broad review of three particular violations the aforementioned eight banks were accused of: tying insurance sales to lending money to customers; wrongly collecting would-be insurance carriers, and incompletely selling insurance by providing insufficient product explanations for customers and neglecting identity checks.

Baek Jae-heum, a bureau director from the Financial Supervisory Service, noted, “We plan to make the seven banks write notes promising that they would not repeat their improper sales of insurance, except for Citibank, whose violation was the most minor among the group.”

The agency conducted a month-long section inspection on eight bank head offices and 66 branches starting in October of last year when the disputes over the delayed second step of Bancassurance regulation policy broke out.

It surveyed 3,100 mid- and small-sized companies that had bought insurance from banks and visited them to confirm individual cases when in doubt.

Suk-Ho Shin kyle@donga.com