Parametric SME product launched before terms filing: StormPay and the GA channel

Conclusion: no. Selling before the terms are filed would breach the Insurance Business Act's product and terms filing regime, and a compliance sign-off cannot cure that.

• Filing is a substantive gate. The supervisor reviews the terms, the trigger and payout mechanics, and the adequacy of disclosure, and may require amendments. A product whose filing is in progress has no approved terms to sell.
• Consequences of an early launch: corrective orders, sanctions against the branch and responsible officers, disputed contracts, and a high probability of consumer redress claims when the first trigger event pays nothing.
• Conditions before any sale: filed and accepted terms; written sign-off by a locally qualified actuary; pre-approved advertising; an amended GA agreement deleting the discretion clause; a documented launch decision by the local CEO acknowledged by head office.
• What to write: a dated compliance opinion declining to sign, the regulatory basis, the conditions for approval, and a revised launch date. Escalate to the group CCO and minute it in the compliance committee. This protects the branch and the officer personally, and creates the record a supervisor will later ask for.

Pricing basis. Japanese loss data with a 12% expense load is not a validated Korean basis. Compliance need not re-price, but it must insist on an independent local actuarial opinion covering frequency and severity, trigger design, expense adequacy, capital and provisioning, and the reinsurance backstop in the head office treaty.

Basis risk is the consumer-protection issue. A parametric policy pays on a station reading, not on the customer's actual loss. An SME that floods while the gauge reads 78 mm receives nothing. Under the Financial Consumer Protection Act the branch must explain the trigger, the station, the exclusions and the possibility of no payment after a real loss in terms the customer understands, and record that explanation.

Conditions to attach:

• A one-page customer explanation of basis risk with a signed acknowledgement.
• A worked example drawn from a recent Korean event, such as the 2022 Seoul floods.
• Clear disclosure that the payout is a fixed amount, not indemnity.
• A distribution rule limiting sales to customers for whom the cover is suitable.
• Post-launch monitoring: review complaint and non-payment rates at 200 policies or three months, whichever comes first.

Two distinct exposures.

Claims intake outsourcing. First-notice claims handling is a core function. The insurer remains responsible whoever answers the phone, so compliance needs a written agreement with service levels, audit and inspection rights, data-protection and confidentiality terms, complaint handling, business continuity, and termination and transition provisions. Most importantly, the supervisory notification or reporting that applies to outsourcing of core functions must be completed before go-live.

Advertising. Under Korean insurance sales rules the insurer is responsible for advertising used by its GA. 'At its discretion' must be deleted. All materials must be pre-approved by the branch, with version control, a ban on unapproved social-media posts, and a monitoring and withdrawal mechanism.

Data. Sharing applicant and claims data with the GA requires a lawful basis under the Personal Information Protection Act, whether specific consent or another recognised ground, plus recipient and processor clauses, minimum-necessary scope and retention limits.

Recommendation: approve the product only when the GA agreement has been re-executed, the advertising control is written into it, and the outsourcing notification is complete.