South Korea: Regulator to carry out intensive audits
Source: Asia Insurance Review | Apr 2019
The Financial Supervisory Service (FSS) has submitted to the Financial Services Commission (FSC) a proposal to carry out comprehensive audits on financial companies here, including insurers, starting as early as this month (April 2019).
This will mark the first time in four years that financial regulators are reviving the audit system, which has been known for its intensity and consequent level of pressure exerted on companies.
The FSS modified the action plan this year to an ‘incentive-compatible’ model, narrowing the range of audit targets and expanding the level of incentives offered to outstanding performers, reported The Korea Herald.
In the past, FSS audits were carried out on all financial players on a regular basis - every three to five years for insurers - but according to the latest proposal, it would henceforth only involve companies that have failed to meet evaluation standards.
Despite the relaxed procedures this year, the audits are weighing on insurers, especially Samsung Life Insurance, the nation’s largest insurer in both assets and sales. At the heart of the tension between the market watchdog and insurers is the issue of the immediate annuity.
In 2017, a policyholder of the company’s immediate annuity plan filed a complaint with the financial authority, arguing that his monthly payout was lower than the amount calculated in the contract based on the minimum returns of 2.5% per annum. Part of the payout had been deducted as working expenses which were not mentioned in the annuity contract. The FSS sided with the client, recommending the life insurer fully compensate customers. Samsung Life’s board said that it advised the management to make partial pay-outs. A