On March 5, 2025, the Financial Supervisory Service (the “FSS”) announced its inspection plan for the insurance sector, including an outline of their planned operational approach and key areas of focus. The main points of the announcement were as follows:
|
1. |
Operational Approach |
-
Comprehensive inspection of insurance companies and general agencies (“GAs”).
|
– |
By conducting comprehensive inspections of insurance companies and their subsidiary GAs, and coordinated inspections of insurance companies and large GAs representing significant amounts of their sales, the FSS intends to identify non-compliant behavior and factors that cause non-compliance. |
-
The specific targets of the inspection will be selected based on a comprehensive assessment of potential compliance risk factors and past data.
-
Serious violations identified during the inspection will be subject to sanctions and possible referral to other relevant authorities. The FSS will closely collaborate with other agencies, including the National Tax Service, to impose strict measures with regards to any significant violations.
|
2. |
Key Areas of Focus |
-
Assess the insurers’ GA management and evaluation policies, and review the GAs’ internal controls and policies to prevent mis-selling.
|
– |
Review of practices relating to the payment of “onboarding allowances” to insurance agents post recruitment. |
-
Identify, and impose penalties against practices that undermine consumer rights and interests, such as (i) unfair denial or reduction of insurance proceeds, (ii) exerting pressure to settle claims, (iii) mis-selling (e.g., false contracts, borrowing agent’s name, etc.), (iv) replacement of existing policies without proper disclosure, and (v) provision of illicit special benefits.
-
Assess the proper operation of key internal governance functions (e.g., remuneration committee), performance and executive evaluation policies and practices, and risk factors being duly reflected in the development of new business.
-
Closely monitor insurance companies with weak financials, and assess possible solvency risks from factors such as excessive competition or undue increase in benefit amounts.
