"Paid Insurance Premiums Regularly, So Why Don't They Pay?" Insurance Companies Withholding Claims (Comprehensive)

"Excusing Violation of Notification Duty"

7 Life Insurers, 4 Non-Life Insurers Caught

FSS Imposes Fines and Other Sanctions

Eun Sung-soo, Chairman of the Financial Services Commission, is shaking hands with attendees at the Insurance Company CEO Meeting held on the 19th at the Financial Services Commission's main conference room in the Government Seoul Office Building, Jongno-gu, Seoul. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Oh Hyung-gil] Insurance companies have been caught en masse for refusing to pay insurance claims or arbitrarily reducing payments, citing failure to notify unrelated matters in advance when policyholders filed claims.

Some non-life insurers deliberately underpaid automobile insurance claims, while life insurers were found to have omitted explanations of important matters during contract signing. Some argue that penalties are too weak, allowing repeated behavior of unjustly withholding or reducing insurance payouts, and call for strict measures.

According to the insurance industry on the 30th, the Financial Supervisory Service recently notified sanctions against seven life insurers and four non-life insurers.

Lotte Non-Life Insurance unjustly reduced KRW 127 million out of KRW 388 million in insurance claims for four contracts from 2015 to 2018, despite no grounds for reduction under the terms, citing breach of post-contract notification obligations unrelated to the accident. During the same period, for 22 automobile insurance cases involving vehicles less than two years old, repair costs exceeded 20% of the vehicle's value before the accident, qualifying for compensation for depreciation under the terms, but KRW 151 million was unjustly unpaid. The company was fined KRW 3 million.

During the same period, Hyundai Marine & Fire Insurance reduced KRW 197 million in claims due to breach of notification obligations unrelated to the insurance accident, and failed to pay KRW 86 million for hospitalization and KRW 40 million for car repairs, resulting in a fine of KRW 266 million.

Samsung Fire & Marine Insurance reduced KRW 82 million in claims for 16 contracts due to breach of notification obligations and underpaid KRW 203 million for 90 automobile insurance cases. A fine of KRW 17 million was imposed.

Hanwha General Insurance unjustly reduced KRW 130 million in claims and failed to pay KRW 178 million in automobile insurance claims, receiving a fine of KRW 25 million. Additionally, it improperly collected KRW 73 million in premiums by not applying premium payment exemptions where applicable under the terms.

Shinhan Life Insurance was fined KRW 266 million and received a supervisory warning for failing to explain important details about business expenses deducted from premiums during telephonic sales of savings-type insurance from 2016 to 2018. Three employees were given cautionary measures.

Mirae Asset Life Insurance was fined KRW 63 million for failing to explain important matters in 51 savings-type insurance cases. Heungkuk Life Insurance was also fined KRW 165 million for the same reason and additionally fined KRW 1 million for arbitrarily reducing claims by KRW 249 million across 10 contracts from 2015 to 2018.

Some insurers were sanctioned for underpaying claims. MetLife Life Insurance underpaid KRW 242 million across 15 contracts from 2016 to 2018 and was fined KRW 13 million. KDB Life Insurance arbitrarily reduced claims, resulting in a KRW 4 million fine and a warning to one executive. DGB Life and Orange Life also received fines of KRW 6 million and KRW 7 million respectively for arbitrary claim reductions.

There are calls to strengthen sanctions and improve systems to prevent recurrence of unfair insurance claim payment practices by insurers.

Cases of insurers unjustly withholding claims have not been eradicated. According to the Financial Consumers Federation, life insurers arbitrarily terminated one out of every 200 insurance claims.

A survey by the Federation on quality-guaranteed cancellations, complaint cancellations, non-payment of claims, breach of notification obligations, and insurer-initiated cancellations in the first half of last year found that out of 479,462 cases, 2,427 (0.51%) were forcibly terminated.

The number of forced terminations is on the rise. In the second half of 2018, 2,323 (0.49%) out of 470,098 claims were terminated.

Baek Hong, head of the Insurance Department at the Financial Consumers Federation, emphasized, "Forcing contract termination when claims are filed after recording income without paying claims is a bad practice that causes consumer complaints. It is a wrongdoing by insurers that must be eliminated as soon as possible."

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