"Simple Underwriting Insurance Must Also Cover Disease Treatment Costs Before Contract"

Limited to 'Occurrences During the Insurance Period' per Terms
Financial Supervisory Service "Improving the Practice of Non-Payment of Insurance Benefits"

[Asia Economy Reporter Oh Hyung-gil] The practice of insurance companies refusing to pay insurance claims due to "pre-existing conditions," which refer to past medical history or current illnesses, is expected to improve.

This is because financial authorities have ruled that it is unfair for some insurance companies to set the payment condition for insurance claims in simplified underwriting insurance policies as diseases "occurring during the insurance period" and refuse to pay claims by stating that the disease occurred before the insurance period.

According to the insurance industry on the 1st, the Financial Supervisory Service recently sent an administrative supervisory letter to insurance companies regarding non-compensation for pre-existing conditions in simplified underwriting insurance.

Simplified underwriting insurance is a product that simplifies the obligation to notify (duty of disclosure) before the contract and expands the eligible age for subscription. It is characterized by relaxed requirements so that people with pre-existing conditions or elderly people who find it difficult to subscribe through the general insurance underwriting process can also enroll.

Typically, the "3-2-5" conditions are considered. These include whether there has been hospitalization, surgery, or a need for additional examination within 3 months; whether there has been hospitalization or surgery due to illness or injury within 2 years; and whether there has been hospitalization or surgery due to cancer within 5 years. Since consumers with medical history or treatment experience mainly subscribe, the premiums can be up to twice as expensive compared to general underwriting insurance.

However, ignoring the purpose of such simplified underwriting insurance, some insurance companies set the payment condition for insurance claims only for diseases that occur or are diagnosed during the insurance period in the policy terms. They also excluded diseases that occurred before the insurance period, limiting insurance payments even when the reason for payment arose.

According to financial authorities, there is a growing number of consumers who suffer damages by receiving notifications of claim reductions or refusals from insurance companies when insurance claims arise due to diseases they had before the insurance contract.

Therefore, the authorities pointed out that since simplified underwriting insurance calculates insurance rates considering diseases that occurred before the insurance period, it is unfair to apply contract terms unfavorable to the policyholder and refuse to pay insurance claims.

They also judged that it violates fairness because some general insurance or other insurance companies' simplified underwriting insurance policies do not have the condition that the disease must "occur during the insurance period."

[Image source=Yonhap News]

Establishing Grounds for Waiting Periods After Enrollment

It was also recommended not to unfairly discriminate against policyholders during the operation of waiting periods, such as the "90-day exclusion after enrollment," in simplified underwriting insurance.

The authorities explained that setting a waiting period for "all disease-related deaths" or setting a waiting period without reasonable grounds for diseases where subjective symptoms cannot be specified is weakly justified, even though subjective symptoms or self-diagnosis vary depending on the disease.

They also stated that it is unfair to set a waiting period only for simplified underwriting insurance while not setting one for the same coverage in other general insurance.

An insurance industry official advised, "Given the nature of simplified underwriting insurance, which lowers subscription requirements, the duty of disclosure is very important." He added, "If one does not truthfully disclose their medical history or provides false information, subscription may be rejected just like with general insurance, the insurance may be unilaterally canceled, and insurance claim payments may be refused, so caution is necessary."

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