The Financial Supervisory Service said Tuesday that it has launched a full-fledged investigation into Samsung Life Insurance after police revealed that two insurance salespeople at the company helped a client to evade tax.
While the Samsung Group-affiliated financial firm has about 35,500 salespeople, dozens of them reportedly manage insurance policies worth more than 5 billion won (S$5.89 million).
According to police and financial regulators, the employers abetted the dodging of income taxes through irregular management of insurance policyholders' money.
"Some could have evaded taxes or exploited tax loopholes after receiving incentives from their company," said an FSS official.
The regulatory official said the scrutiny will be focused on the internal ethics management of Samsung Life and whether the company turned a blind eye to irregularities by its employees.
Market observers have raised the possibility that the FSS could widen the scope of its inquiry to the overall life insurance sector. The number of salespeople in the industry is estimated at 150,000.
Police said that two insurance salespeople of Samsung Life aided alleged tax evasion worth 40 billion won in concert with a local businessman, surnamed Lee, from 2005 to 2012.
The employees gave gifts worth hundreds of millions of won to Lee's wife as a quid pro quo for buying some 400 insurance policies, according to authorities.
They are suspected of splitting 40 billion won of Lee's assets into the 400 insurance contracts to hide it from the tax authorities, as they were tax-exempt products.
Meanwhile, some angry consumers complained that Samsung Life salespeople misled policyholders about dividend payments during their product sales promotion activities.
"Apart from insurance premiums, the contracts for the dividend-oriented products stipulate that insurance firms should pay 90 per cent of gains from the stock market and other operating profits to policyholders," said an official of the Korea Finance Consumer Federation.
The company has continued to maintain the stance over the past few years that it has no obligation to pay the dividends under revised regulatory rules.
Some market insiders criticised that the FSS has taken a lukewarm attitude toward the dispute between insurers and policyholders.