By Kang Seung-woo
When it comes to the insurance business, earning customers’ trust is crucial for success. In that regard, an insurance firm always places top priority on maintaining a good corporate image through a variety campaign ads and social contribution activities.
Some leading local life insurers, including Korea and Shinhan, are suffering, as their parent groups are entangled in a series of business scandals and their corporate images have been tarnished as a result.
According to insurance industry sources Monday, Hanwha Group is seeking to rename Korea Life, Hanwha Life, backed by the strong commitment of group Chairman Kim Seung-youn.
However, this plan has hit a snag, due to a probe into Kim for his creation of slush funds and a planned audit of the sale of Korea Life Insurance to Hanwha Consortium, putting the change of name in doubt.
Prosecutors raided the headquarters of Hanwha and its affiliate, Hanwha Securities, in September and said they discovered scores of borrowed-name bank accounts that Kim might have used to keep illegal funds possibly amounting to tens of billions of won, while the Board of Audit and Inspection of Korea (BAI) said last month that it will audit all of the players involved in the deal including Korea Deposit Insurance Corp. (KDIC), the Financial Services Commission (FSC) and Korea Life Insurance.
Another case is Shinhan Life, which has been a rising star in the sector on the strength of the brand power of Shinhan Financial Group.
But recent management strife and its chairman’s departure after disclosure of his financial irregularities have hit its affiliates hard as well as the group itself as these scandals can tarnish insurance firms.
The focus is on constructing a credible image and Shinhan Financial, the nation’s No. 1 financial services company by market value, suffered an internal power struggle between the top three executives of the group and Chairman Ra Eung-chan was slapped with a heavy penalty preventing him from taking executives posts at any financial firm for the next four years for violating the real-name financial transaction law.
As for Heungkuk Life Insurance and Heungkuk Fire and Marine Insurance, both owned by Taekwang, have also been left reeling following recent troubles.
Despite the company’s losses, Taekwang Chairman Lee Ho-jin spent 30 billion won to purchase a membership in a gold club at above-market prices.
In contrast, Tong Yang Life Insurance is on pace to reach its all-time high in earnings, but Tong Yang Group, the parent company of the insurer, is considering selling its stake to improve the financial structure of Tong Yang Major Corp.
Tong Yang Major Corp., a cement unit of the group, has struggled due to weakening demand in the construction and cement industries.
“Local insurance companies are vulnerable to risks associated with their groups’ management,” said Jo Yeon-haeng, secretary general of the Korea Insurance Consumer Federation.
“But the behavior of viewing the assets of the affiliated insurance companies as financial pipelines to the main group should be ruled out.”