Card firms face sanctions for illicit insurance sales

The nation’s financial regulator has detected hundreds of instances of illicit insurance underwriting by card companies and is weighing penalty options, sources said Monday.

The Financial Supervisory Service recently investigated allegations against card companies that customers were insufficiently informed about the insurance plans before applying over the phone.

The problematic underwriting of insurance plans sold via card firms centers upon the telemarketers involved calling up the card users and recommending insurance plans.

While the sale of insurance by card firms is legal, the FSS suspects that the telemarketers lacked expertise concerning the plans that they were selling to card users.

The country’s major card companies, including Samsung, Hyundai, Lotte and KB Kookmin, as well as the card service firm BC, recently underwent investigation. KB Kookmin and Samsung faced a targeted investigation of their insurance business.

“(The FSS) has conducted a special investigation over the insurance division, and we are awaiting the results,” a KB Kookmin Card official said.

The investigative results and the intensity of penalties are expected to be announced at the end of the month by the review committee of the Financial Services Commission.

The investigation came after the financial authorities took stern actions against illegal underwriting of financial products, exemplified by the Tong Yang crisis that surfaced in September.

In the wake of the Tong Yang crisis, the regulator chief vowed “zero tolerance” for those causing market disorder and unwarranted consumer losses.

By Chung Joo-won (joowonc@heraldcorp.com)