"We'll Give You 10 Million Won Every Month": Group That Lured Executives Into Insurance With Cash Rebates Referred to Prosecutors

Corporations pay premiums as executives are urged to take out insurance
Executives receive cash every month for 14 months
Evaded 22.9 billion won in taxes and caused losses for agency headquarters

A police investigation has uncovered an insurance sales organization that induced corporate executives to take out insurance by offering them cash rebates worth tens of billions of won and evaded a large amount of taxes.

On Nov. 11, the Seoul Metropolitan Police Agency's Metropolitan Crime Investigation Unit said it had arrested the operator of an insurance agency, identified as A, who oversaw the scheme, and referred 231 people, including organization members and corporate executives, to prosecutors on suspicion of violating the Insurance Business Act, the Act on the Aggravated Punishment of Specific Crimes (tax evasion), and the Act on the Aggravated Punishment of Specific Economic Crimes (breach of trust), among other charges.

According to police, A and others are accused of operating branches of an insurance agency and persuading 505 corporate executives to sign up for executive term life insurance, then providing them with 73.2 billion won in cash rebates and other benefits in return.

Executive term life insurance is a type of life insurance that provides coverage against financial losses that may arise from the death of an insured executive. The corporation is both the policyholder and beneficiary, while the executive is the insured person; premiums are paid with corporate funds.

Investigators found that the group approached corporate executives at golf courses and other venues, saying, "If you sign up for corporate insurance, we'll pay you a cash rebate personally."

The investigation found that the group offered special benefits by paying executives 10 million won in cash each month for 14 months. The money came from the recruitment commissions paid to insurance agents when a corporation paid monthly premiums of 10 million won.

The group was found to have concluded insurance contracts and received recruitment commissions using the names and bank accounts of other insurance agents who were not the actual solicitors. Police said the group then withdrew the commissions deposited into those accounts in cash and handed them to corporate executives as rebates.

Police applied charges of violating the Insurance Business Act for providing money and other benefits in exchange for concluding insurance contracts. Corporate executives who received rebates while paying premiums with corporate funds were charged with receiving benefits through breach of trust. Those who lent access media, such as bankbooks and cards, were charged with violating the Electronic Financial Transactions Act.

Police also said they found that the group had failed to report 36.8 billion won in income and evaded 22.9 billion won in comprehensive income tax from 2021 to 2023.

The group concealed who the income belonged to by distributing insurance recruitment commissions among accounts held in several people's names. Investigators also found that it reduced its tax bill through false expense claims involving sham trading companies and by abusing a tax credit program for young entrepreneurs.

Police applied charges of tax evasion under the Act on the Aggravated Punishment of Specific Crimes. They arrested one person suspected of leading the tax evasion scheme and referred three people suspected of aiding and abetting it to prosecutors without detention. They also obtained an order to preserve 259 million won in assets for the recovery of criminal proceeds.

Police determined that A's group had earned about 116.3 billion won in insurance commissions over roughly three years while concealing its rebate-based sales practices from the insurance agency's headquarters. However, when the group ran short of funds to pay the rebates, it terminated 410 insurance contracts early, causing the headquarters losses of about 22.4 billion won, according to investigators. Police applied charges of breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes.

Police noted that taking out insurance and terminating policies early to secure sales commissions and rebates can increase insurers' losses and ultimately lead to higher premium burdens for ordinary policyholders.

Police also cautioned that lending an insurance agent code or identity, or renting out access media such as bank accounts or cards, may be punishable as a violation of the Electronic Financial Transactions Act.

This content was produced with the assistance of AI translation services.