Samsung Life Insurance is facing public criticism for not paying dividends to policyholders, reversing its earlier promise for payouts from stock gains.

The situation comes after the company sold dividend-oriented life insurance products to a large number of individuals, according to a bulletin board on the website of the Korea Finance Consumer Federation.

Angry consumers stress that Samsung Life salespeople “commented on dividend payments to policyholders” during their product sales promotion activities.

“Apart from insurance premiums, the contacts for the dividend-oriented products stipulate that insurance firms should pay 90 percent of gains from the stock market and other operating profits to policyholders,” said a leader of the consumer federation.

Despite its promise during the consumers’ subscription for the products, the company has continued to maintain the stance over the past few years that it has no obligation to pay the dividends under revised regulatory rules.

Some consumers argued that the Financial Supervisory Service has taken a lukewarm attitude toward the dispute between insurers and policyholders.

Some claimed that the regulator has been on the side of Samsung Life, pointing to the “invisible power” of the company as a main financial unit of Samsung Group.

An FSS official rejected the argument, saying the regulator frequently clashed with the nation’s largest insurer over allegations that Samsung Life’s major shareholders including Samsung affiliates have enjoyed huge dividends via irregular intra-group funding.

Samsung Electronics chairman Lee Kun-hee holds about a 20 percent stake in Samsung Life, while Samsung Everland, essentially the holding company of the Samsung business empire, is the second-largest shareholder with a 19.3 percent stake. The majority shareholder of Samsung Everland is Lee’s son, Jay-yong, vice chairman of Samsung Electronics.

Concerning the dividends to policyholders, he said the regulator is also waiting for the Supreme Court’s verdict. About 2,800 customers of Samsung Life have been in legal litigation over the same case in a type of class action suit.

Recently, under the initiative of FSS governor Kwon Hyouk-se, regulatory inspectors have been investigating whether Samsung Life and other major players were misused as a funding source for their parent business groups.

Over the past few decades, some business groups have been suspected of exploiting their financial subsidiaries, such as insurance and credit card units, as a tool to secure operating funds of their manufacturing subsidiaries or setting aside slush funds.

According to FSS data, life insurance products can be divided into two types based on whether or not policyholders are paid dividends.

Customers who are signed to participating life insurance policies should receive payments on an annual basis over the life of their policies. Those signed to non-participating policies do not earn dividends, although the insurance premiums for these policies are usually lower.

By Kim Yon-se (kys@heraldcorp.com)