Increase in Insurance Dispute Mediation... 'One-Sided Binding Effect' Introduction Stalled (Comprehensive)

Financial Supervisory Service Considering Introduction of 'One-Sided Binding Effect'
Eun Seong-su: "Isn't This a Deprivation of the Right to a Trial?"
Rep. Lee Yong-woo Proposes Application to Disputes Under 20 Million Won

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] As the number of dispute resolution applications and lawsuits between consumers and insurance companies increases, there is speculation that the introduction of 'unilateral binding force' prioritizing small claims may gain momentum. Unilateral binding force is a system that allows only consumers to appeal against decisions made by the Financial Supervisory Service's Dispute Resolution Committee, and Financial Supervisory Service Governor Yoon Seok-heon is strongly pushing for its introduction.

However, following the opposition expressed by Financial Services Commission Chairman Eun Sung-soo, insurance companies have also stated that more discussion is needed, arguing that opportunities for legal interpretation may be reduced.

According to the Life and Non-life Insurance Association on the 4th, the number of non-life insurance dispute resolution applications reached 20,072 by the third quarter of this year, an increase of 10.4% compared to the same period last year. By insurer, Samsung Fire & Marine Insurance had the highest number with 4,598 cases, followed by Hyundai Marine & Fire Insurance with 3,595, DB Insurance with 2,678, KB Insurance with 2,305, and Meritz Fire & Marine Insurance with 1,885. It was confirmed that large companies with many policyholders also ranked high in the number of applications.

The number of cases where lawsuits were filed along with dispute resolution was 111, an increase of 5 cases from last year.

On the other hand, the number of life insurance dispute resolution applications significantly decreased from 7,806 in the third quarter of last year to 6,462 this year. However, the number of lawsuits filed increased from 21 to 24.

Dispute resolution applications are procedures in which the Financial Supervisory Service induces an agreement between parties regarding disputes raised by consumers against financial companies. Typically, in non-life insurance such as automobile insurance, where the policyholder and the beneficiary are different, many dispute resolutions occur over whether the insurance payout is appropriate based on the degree of fault.

In particular, with the popularization of black boxes, there is a growing trend of applying for dispute resolution to determine the degree of fault in traffic accidents.

The industry is closely monitoring the recent increase in dispute resolution applications. There is a view that the introduction of unilateral binding force will be expedited as the number of applications continues to rise.

Unilateral binding force allows only consumers to file appeals, preventing financial institutions from contesting.

The Financial Supervisory Service is considering introducing it for small claims as it can resolve disputes early, reducing time, costs, and administrative burdens for both consumers and insurers, but it is at a standstill due to opposition from financial companies and the Financial Services Commission.

Chairman Eun expressed a differing view from the Financial Supervisory Service at last month's national audit, saying, "While it is understandable from the perspective of consumer protection, I wonder if it deprives the constitutional right to a trial," regarding unilateral binding force.

In the National Assembly, Democratic Party lawmaker Lee Yong-woo is pushing for legislation on unilateral binding force amid conflicts between the Financial Supervisory Service and financial companies triggered by private equity fund incidents such as KIKO and Lime. In August, Lee proposed the 'Financial Consumer Protection Act Amendment' that applies unilateral binding force to small disputes under 20 million won.

According to the Korea Insurance Research Institute, countries like the UK and Germany recognize unilateral binding force for dispute resolution results in small claims. However, they pointed out that the introduction of unilateral binding force could have negative effects in cases of significant legal importance.

The insurance industry is also cautious about the side effects of introducing unilateral binding force. A non-life insurance company official said, "In the case of automobile insurance, even if it is a small claim lawsuit, once a conclusion is reached, it can affect all policyholders, so the impact is significant," adding, "Even for small claims, the right to file a lawsuit should be considered in judgment."

Lee Yong-woo, Democratic Party of Korea / Photo by Dong-joo Yoon doso7@

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