South Korea’s Financial Supervisory Service (FSS) is preparing to introduce veto rights for chief consumer officers (CCOs) on insurers’ product review committees, introducing consumer-focused oversight into insurance product design and approval and tightening governance expectations for the financial sector.

CCO veto in insurance product governance

The Asia Business Daily reported that under proposals discussed at the FSS’s new Financial Consumer Protection Advisory Committee, insurance companies would be required to include the CCO as an ex officio member of their internal product committees and grant that role veto authority over product deliberations. In addition, insurers’ product committees would be required to conduct structured profitability analyses and formal assessments of the appropriateness of coverage limits by guarantee before a product can proceed. The changes would require consumer-impact considerations to be addressed alongside pricing and competitiveness at the product approval stage, instead of being handled mainly as a compliance exercise later in the process.

The FSS is also examining guidance to manage third‑party risks such as overtreatment and to broaden the range of products subject to notification to address coverage designs associated with higher claims volatility. These changes would apply to insurers in Korea – including Asia-based groups with local subsidiaries or joint ventures – and may influence how they design benefit limits, medical coverage features, and triggers, particularly in health and medical indemnity lines.

Advisory committee to guide consumer protection reforms

These measures were discussed at the first meeting of the Financial Consumer Protection Advisory Committee, held on March 6 at the FSS headquarters in Yeouido, Seoul. The committee reports directly to FSS Governor Lee Chanjin and is expected to provide input on supervisory practice, inspections, and institutional reforms, with implementation to take place in stages. Lee framed the committee’s creation as part of a shift in supervisory orientation. “The launch of the committee is not merely the creation of a new body, but an important turning point in redefining the direction and philosophy of financial supervision with a focus on consumers,” Lee said, as reported by The Asia Business Daily.

Lee added: “The sustainable development of the financial industry is impossible without consumer trust, which is fundamental to financial supervision. We must return to the spirit of ‘Bonrip Doseong’ (If the foundation is established, the path will follow).” The FSS plans to convene the committee roughly every two months in the first half of the year and to link its recommendations with on‑site supervision and rulemaking through an internal feedback process.

Claim review criteria and policyholder notifications

Another focus area is the treatment of changes to claims review standards. At present, criteria can change due to court rulings or other developments, but communication to policyholders has often been limited or delayed. The FSS intends to require insurers to notify customers of material changes in claims review criteria during the life of the policy, so that policyholders are informed before seeking treatment or submitting a claim.

To reinforce this, “significant changes to insurance payment review criteria for consumers” would become a mandatory item for review by insurers’ litigation management committees, with expanded notification duties to be set out in regulation or guidance. The approach points toward a more continuous disclosure model in which insurers track legal and operational changes affecting claims handling and provide updates to customers during the policy term, rather than relying solely on original policy wording.

Shorter consumer protection evaluations and wider scope

Beyond individual product issues, the FSS plans to shorten the evaluation cycle for financial consumer protection practices from three years to two. The scope of these evaluations will expand to include asset management companies and corporate insurance agencies, with sector‑specific benchmarks introduced to reflect differing risk characteristics. Firms that perform strongly on these revised assessments may receive incentives intended to support stronger internal consumer protection governance, including in insurance distribution models that rely on corporate agencies or general agencies.

The FSS also plans to introduce a separate review of how banks support inclusive finance. The framework will examine four areas: internal organisation and strategy for inclusive finance, support for low‑income consumers, support for small and medium‑sized enterprises, and support for small business owners. The Financial Services Commission and a dedicated task force will be involved in developing related incentives.

Refund rules and investment-linked product disclosures

In payments, new guidance will clarify the statute of limitations for prepaid electronic payment instruments (pay money) and increase refund ratios after expiry. Under the proposal, cash refunds must cover 90% of amounts up to KRW 50,000 and 95% of balances above that threshold. Where providers refund balances in points, they must return 100% of the original amount. In capital markets, the FSS will review the current model for paid stock information services offered by securities companies, where usage fees are charged on top of brokerage commissions. Firms will be required to send regular notices to customers setting out subscription status, cancellation arrangements, and the cost-sharing structure. For online investment-linked financial platforms, particularly those dealing in bill- and receivables‑backed products, the FSS plans to require clearer explanations of risks related to both the obligor – such as payment gateway companies – and the underlying receivables. The supervisor will prepare investor information guidelines specific to these structures.

Consumer protection plan, misselling risk, and incentive structures

In parallel, the FSS has released its “2026 Comprehensive Plan for Consumer Protection Key Work Initiatives,” which outlines five core supervisory principles for the year. These include moving to a supervisory approach that covers the full product life cycle, placing financial consumers at the centre of the system, strengthening redress mechanisms, enhancing protection for vulnerable consumers, and adjusting supervisory and inspection practices to support public trust. According to The Asia Business Daily’s report, a central element is the move to reinforce explanation duties at the point of sale, especially in insurance and financial investment products where misselling risk is assessed as higher. The FSS is drafting “Guidelines on Explanation Obligations by Financial Product Type” (tentative title), with plans to apply them first to products regarded as having higher misselling risk.

Noh Younghoo, senior director of the Consumer Protection Supervision Bureau, said: “To prevent the spread of consumer harm, financial companies need to provide information more proactively.” Under the plan, financial institutions will be expected to alert customers when conditions for principal loss are close to being met, or when new external variables or real‑economy changes increase the risk of losses, such as movements in underlying asset prices or the approach of knock‑in events.

At the same time, the FSS is reviewing key performance indicators (KPIs) and bonus structures for executives and front‑line staff, including private bankers, to align sales incentives with a “best interest” standard rather than short‑term revenue metrics. Possible changes include more detailed disclosure of performance-linked pay, stronger shareholder oversight of executive compensation, longer or larger deferral of variable pay, and clearer triggers for re‑evaluation and clawback. These proposals have generated concern in parts of the industry. According to The Asia Business Daily, one participant in the FSS briefing said: “If the authorities provide guidelines even for employee salaries, it is tantamount to telling us not to do business at all,” indicating uncertainty about the potential reach of remuneration and KPI reforms.

Implications for insurance professionals in Asia

The Korean developments indicate a regulatory direction that embeds consumer considerations within product design, governance, and incentive structures. CCO veto rights, closer scrutiny of claims review criteria and notification practices, and review of sales KPIs suggest that conduct risk is being addressed at multiple points in the value chain. An FSS representative said the authority would “strengthen the feedback system to ensure that the committee’s advisory opinions are reflected in supervisory, inspection, and institutional improvement work” and would continue to “identify structural and habitual factors that undermine consumer trust and reinforce a proactive consumer protection framework.” Regional groups with Korean operations may need to align internal product approval processes, disclosure frameworks, and remuneration policies with these standards, while supervisors in other Asian markets are likely to monitor the Korean approach as they adjust their own insurance conduct and consumer protection regimes.