The Financial Supervisory Commission (FSC) yesterday fined Cathay Life Insurance Co (國泰人壽) a total of NT$5.6 million (US$185,892), the most severe penalty levied against the insurance unit of Cathay Financial Holding Co (國泰金控) in the past three years.
An examination conducted in late 2018 found that some of the insurer’s salespeople improperly encouraged their clients to cancel old insurance policies to buy new products, to apply with Cathay Life for mortgages to buy policies or to borrow money against their policies, the commission said.
Even though 14 clients later regretted their decisions and filed complaints with Cathay Life, the company failed to improve its internal control system for its sales agents and underwriting mechanism, which led to a fine of NT$3 million for breaching the Insurance Act (保險法), the commission said.
Some salespeople admitted to misleading clients after the examination, FSC Insurance Bureau Chief Secretary Lin Yao-tung (林耀東) told a news conference in New Taipei City.
“It is not always improper for salespeople to encourage their clients to cancel old policies and buy new ones, but they should clarify the advantages and disadvantages,” Lin said.
The insurer’s unit in China’s Liaoning Province was in March 2017 barred by Chinese regulators from selling new accident insurance policies for six months as punishment for not precisely recording the information of clients, Lin said.
However, Cathay Life did not report the ban to the commission in time — a contravention of the Act Governing Relations Between the People of the Taiwan Area and the Mainland Area (臺灣地區與大陸地區人民關係條例) — leading to a NT$2 million fine, he said.
The insurer also sold three controversial policies to three institutions, including a personal insurance policy to an employee of a temple, which was named as the beneficiary, Lin said, adding that the commission fined the firm NT$600,000.
Cathay Life said that it would enhance its supervision of salespeople, its internal control system and its underwriting process in accordance with regulations.
The firm said that since 2018 it has required its unit in China to report any punishment in time and would ask its staff to call clients who borrow money within one month of buying a new policy.
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