The Financial Supervisory Service is considering taking punitive measures against Ergo Daum Direct, an online auto insurance firm, for fabricating the ratio of insurance payouts to premiums ― also called loss ratio.

Though FSS officials said they have yet to decide on the sanction level, there is a high possibility that the insurance firm will be issued an institutional “warning” or “caution” by the regulator.

But the punishment is not expected to deal a heavy blow to the insurance firm’s business as it was virtually suspended due to its merger process after Axa Direct Korea, the local unit of the France-based Axa General Insurance, took over the online insurer last year.

FSS officials said Ergo Daum had allegedly sought to increase its market share by rigging the loss ratio and selling insurance products at unfair prices.

Aside from issuing a warning or caution, the FSS ― in consultation with the Financial Services Commission ― may choose to levy a certain amount of fines on the firm.

Axa Direct Korea has unveiled its goal to become the top player in the local online insurance market by 2015 by creating a synergy effect with Ergo Daum.

Direct premiums refer to premiums collected by the insurer from policyholders, before reinsurance premiums are deducted. Insurers share some direct premiums and the risk involved with their reinsurers.

“We aim to become a top player in the Korean online insurance market by maintaining the growth rate of 14 percent per annum,” said a senior Axa Direct executive.

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