DB Insurance Subsidiary "Better Performance Evaluations for Paying Less Customer Insurance Claims" (Comprehensive)

Financial Supervisory Service Issues Institutional Warning to DB CSI Claims Adjustment

"Unreasonable Inclusion of Consumer Rights Violation Factors in KPI"

[Asia Economy Reporter Oh Hyung-gil] It has been revealed that DB Insurance's 100% subsidiaries, which have been performing claims adjustment tasks, have been evaluating employees based on the number of cases where insurance payments to customers were reduced or not paid.

Subsidiary employees, in order to receive good evaluations, have unreasonably calculated insurance payments by broadly recognizing the insurer's exemption over the customer. The claims adjustment and insurance payment review tasks, which should be fair, inevitably took place from the insurer's perspective, and the damage inevitably fell entirely on consumers.

According to financial authorities and the insurance industry on the 18th, the Financial Supervisory Service (FSS) issued a 'corporate warning,' classified as a severe disciplinary action, to 'DB CSI Claims Adjustment,' a subsidiary of DB Insurance, on the 14th.

From August 2018 to June last year, DB CSI was found to have improperly underestimated the loss amount in 43 insurance claim cases and either drafted or demanded settlement agreements as a condition for insurance payment.

According to the current Insurance Business Act, claims adjusters must not unfairly infringe on the interests of policyholders or other stakeholders when performing claims adjustment tasks. When an insurance event such as a traffic accident occurs, claims adjusters investigate and analyze it to determine the scope of compensation and estimate the loss amount, and must perform their duties objectively and fairly.

However, the FSS investigation revealed that DB CSI operated a performance evaluation indicator (KPI) system for employees, calculating performance using amounts of insurance payment reductions or the number of reduced payment cases. Scores were assigned based on the achievement rate against targets. These KPI results were reflected in employee rewards and salaries.

The company explained, "To prevent excessive insurance payments caused by errors of practitioners beyond the insurance payments stipulated in the policy, we have reflected the reduced amounts from the claimed insurance payments calculated according to DB Insurance's unfair claim prevention management standards."

The financial authorities' judgment was different. The FSS viewed that inducing practitioners to perform claims adjustment and payment review focused on insurance payment reductions or exemptions undermines fair claims adjustment and insurance payment review tasks. They concluded that reflecting elements that could infringe on consumer rights in KPIs is unreasonable and recommended improving the KPI system.

It was also confirmed that from January 2016 to August last year, DB CSI violated business standards by performing about 60,000 claims adjustment tasks worth 20 billion KRW nationwide at 17 offices without full-time claims adjusters.

Earlier last month, other claims adjustment subsidiaries of DB Insurance, 'DB CAS Claims Adjustment' and 'DB Automobile Insurance Claims Adjustment,' also received improvement orders from financial authorities for applying insurance payment reduction amounts as KPI items.

DB CAS, like DB CSI, calculated performance by summing insurance payment reduction amounts in KPI items such as insurance payment review thoroughness and actual medical expense review thoroughness, reflecting these in scores.

DB Automobile Insurance also operated average insurance payments and loss management as KPI items for departments, centers, and practitioners. They evaluated achievement rates against targets to assign final performance evaluation scores, which were reflected in salaries. The authorities judged that this induced claims adjustment aimed at insurance payment reductions or exemptions.

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