|Meritz Fire & Marine Insurance's headquarters in southern Seoul|
The financial regulator last month looked into non-life insurers to check their damage inspection fees, which are a key element in calculating insurance premiums, after Meritz Fire & Marine Insurance were found to have excessively raised the fee.
The hike came at a time when other non-life insurers raised their insurance premiums. Meritz did not raise its insurance premium, but increased the damage inspection fee instead.
The damage inspection fees of major non-life insurers ― Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance and KB Insurance ― stand at 3 percent to 3.8 percent. This is a 1 percentage point hike from the previous year. Insurers change the rate in April or October every year.
Meritz, however, was found to have raised its damage inspection fee multiple times, and applied a different rate for different policies. The rate for its long-term policies stood at 5 percent, policies for children at 6 percent and for drivers at 18 percent. These mark a 3-percentage point, 2-percentage point and 7-percentage point hike, respectively, from last year.
The FSS is set to look more closely into Meritz over its damage inspection fees.
|Kyobo Life Insurance's headquarters in central Seoul|
The supervisory agency had plans to inspect financial firms in the first half of this year, but the on-site inspections were deferred to prevent the spread of COVID-19.
While the FSS may reduce the scale of inspections considering coronavirus infections continue to occur, it will resume the series of inspections in the latter half of the year beginning with Kyobo Life.
The authority is set to look into the governance structure and financial soundness of the insurer. The FSS is also expected to examine the ongoing suit between Kyobo Life Chairman Shin Chang-jae and financial investors of the insurer.
Shin is embroiled in a suit with four of the insurer's investors including the Hong Kong-based Affinity Equity Partners. The chairman in 2012 signed a contract with a consortium of the four investors which included put options. A put option is a contract that provides the owner with the right to sell an asset at a pre-determined price in a specified time frame. The contract stated the investors could exercise put options if Kyobo Life did not go public within three years.
Kyobo failed to go public by the specified time, and the investors exercised the put options on Oct. 23, 2018, but Shin refused to honor them stating there was a problem with the contract.
The investors have filed a request with the International Chamber of Commerce last year for arbitration on the matter and proceedings are ongoing.
"Authorities have requested documents on our insurance business," a Kyobo Life official said. "We will prepare thoroughly for the inspection."
The FSS is expected to begin the on-site inspection for Kyobo in September, after reviewing the submitted documents.