On May 9, 2018, Jong-Gu Choi, Chairman of the Financial Service Commission (“FSC”), held a press conference and announced the FSC′s policy direction for supervision of the insurance industry, including improvements to protect consumers and enhance their benefits. 

Details of the Announcement:

The FSC plans to expand its organization related to financial consumers to strengthen consumer protection in the financial sector, and to manage and coordinate existing financial policies and businesses from a consumer protection point of view.  

To this end, the FSC aims to prepare a comprehensive consumer protection plan by actively searching for consumer protection policies which can tangibly affect people′s daily lives, even before the enactment of the Financial Consumer Protection Act.  In connection with the “financial consumer protection status evaluation system” included in the Financial Consumer Protection Act, the FSC announced that it is considering plans to impose penalties or partially suspend a company′s business if its financial consumer protection evaluation is poor, rather than to merely announce the evaluation results.

The FSC intends to focus on improving consumer protection in the insurance sector first, re-examining each stage of the sales process from a consumer protection point of view, from advertising to solicitation to contract execution to payment of insurance premium to payment of insurance proceeds.  

Examples Provided by the FSC:

1. Advertising stage: Improve insurance advertisements televised through home shopping channels, etc.

Make the form and contents of the insurance advertisements more practical, so that consumers can more easily understand which terms and conditions might be advantageous and/or disadvantageous by simply watching the insurance advertisement.

2. Solicitation stage: Reorganize solicitation channels, including insurance solicitors and insurance agencies

Improve the system and commission scheme related to solicitation to prevent poor follow-up management of insurance contracts due to high turnover or frequent retirement of insurance solicitors, and to ensure compliance with laws and regulations at the solicitation stage.

3. Contracting stage: Ensure understandability of the insurance application form, product description, and general terms and conditions

Change all terminology used in application forms, product descriptions, and general terms and conditions that are difficult for consumers to understand into easy terminology, and if necessary, enhance consumers′ understanding by using diagrams, examples, and illustrations.

4. Pay-in/pay-out stage: Prepare plans to minimize disputes over payment of insurance proceeds

Determine the major causes of disputes and complaints related to insurance, such as refusal to pay insurance proceeds, reduced payment, and delay in payment, and take steps to resolve these issues.
Consider imposing sanction (up to suspension of sales) for insurance products whose terms are unclear or for insurance products that fail to reflect the contents of the general terms and conditions, especially concerning payment and reasons for refusal of payment of insurance proceeds.