Hanwha Life Insurance (Yonhap)
South Korea’s financial watchdog said Thursday it will hold a sanctions committee later this month concerning Hanwha Group’s insurance unit’s financial support for the conglomerate’s duty-free business, posing a threat to the company‘s digital transition drive.
According to the Financial Supervisory Service, Hanwha Life Insurance paid for the interior decoration of Hanwha TimeWorld’s duty-free shop at the 63 Building in Yeouido in Seoul in 2016.
Hanwha Life owns the 63-story skyscraper. Hanwha Galleria TimeWorld is one of the major stakeholders controlling the insurance company, along with Hanwha Corp. and Hanwha Engineering and Construction. The duty-free unit holds 1.75 percent of shares in Hanwha Insurance, while Hanwha E&C holds a controlling stake of 25.09 percent.
The FSS conducted a comprehensive inspection on the insurer last year and reached the conclusion that the insurer had violated the insurance law that bans insurance companies from providing financial support to their major shareholders.
Authorities also found irregularities with Hanwha Insurance for paying less in death benefits to families of insurants who died by suicide due to mental disorders, processing the cases as deaths by general causes.
The FSS said in its preliminary notice that Hanwha Life could face an institutional warning -- a heavy penalty that prohibits companies from launching new products or services for a year. In addition, should the sanction take effect, the insurer is banned from acquiring other firms.
FSS imposing an institutional warning could put a brake on Hanwha Life’s new business plans centered on digital transition, including MyData -- a government-led project in which financial companies offer integrated management of personal credit information such as banking transactions or credit card records, experts say. Hanwha Life was among the 116 companies that have shown interest in receiving government approval to launch related services, according to a survey conducted by the Financial Services Commission in May.
The insurer is also facing a setback in its plan to take over People Life, an independent life insurance general agency, to expand its sales capacity.
The company denied offering illegitimate benefits to other affiliates and deliberately handing out less in death benefits to customers.
“(Hanwha Life Insurance) supported the opening of Hanwha Galleria’s duty-free shop, but the move is regarded as a common practice in business circles. Also, the company has compensated for suicide-related losses with general death benefits so far,” an official said.
The level of the penalty will be decided at the sanctions committee.
The four levels of FSS’ penalties targeted at an institution start from a disciplinary warning, escalating to an institutional warning, institutional caution or revocation of business permission.
By Choi Jae-hee (email@example.com