Disputes Between Insurance Policyholders and Non-Life Insurers Surge... Exceeding 20,000 Cases for the First Time Ever

Sharp Increase in Litigation Before Dispute Mediation
Financial Consumer Protection Act Enforced in March... Litigation Prohibited
Concerns Over Prolonged Insurance Disputes

[Asia Economy Reporter Oh Hyung-gil] Last year, the number of dispute mediation cases filed by insurance policyholders against non-life insurance companies exceeded 20,000 for the first time ever. It was also reported that cases where insurance companies filed lawsuits before completing the dispute mediation process significantly increased.

However, starting next month, the implementation of the Financial Consumer Protection Act (FCPA) will fundamentally prohibit filing lawsuits before dispute mediation for small-amount disputes. The insurance industry is concerned that prolonged disputes will increase operational burdens.

According to the Life Insurance and Non-life Insurance Associations on the 3rd, the number of dispute mediation applications against non-life insurers last year was 20,380 cases (excluding duplicates and repeats), a 4.6% increase from 19,466 cases the previous year. The number of dispute mediation applications has been increasing annually, with 13,961 cases in 2016, 16,191 in 2017, and 17,260 in 2018.

This is interpreted as being due to frequent conflicts with consumers over issues such as fault ratios in automobile insurance, a major product of non-life insurers.

An industry insider explained, "Looking at the number of dispute mediation cases, large companies with many policyholders rank at the top, and since they sell many products, disputes are inevitable. In non-life insurance, the policyholder and the beneficiary are different, so conflicts frequently arise in determining insurance payouts."

Increase in Lawsuits Filed Before Dispute Mediation Applications

By insurance company, Samsung Fire & Marine Insurance had the highest number of dispute mediation applications with 4,160 cases. This was followed by Hyundai Marine & Fire Insurance with 3,692 cases, DB Insurance with 3,181 cases, KB Insurance with 2,720 cases, and Meritz Fire & Marine Insurance with 2,241 cases.

On the other hand, during the same period, the number of dispute mediation applications against life insurance companies was 6,868 cases, an 11.3% decrease from 7,747 cases the previous year. Hanwha Life recorded 1,469 cases, Samsung Life 1,369 cases, and Kyobo Life 907 cases.

Dispute mediation is a procedure where the Financial Supervisory Service (FSS) facilitates an agreement between parties in disputes raised by consumers against financial companies. It is established when a dispute mediation application, including the cause and evidence of the dispute, is submitted to the FSS.

Since last year, cases where insurance companies file lawsuits before dispute mediation applications have also increased. Last year, non-life insurers filed 155 lawsuits before the dispute mediation process was completed, a 10% increase from 140 cases the previous year.

If an insurance company files a lawsuit against a consumer before dispute mediation, the mediation process is immediately suspended, making it difficult for financial authorities to provide relief. Because of this, insurance companies have been criticized for choosing lawsuits over dispute mediation against consumers who lack financial or time resources.

Starting in March, the FCPA will introduce the ‘Prohibition of Mediation Withdrawal System’ to prevent lawsuits before dispute mediation. This system prohibits financial companies from filing lawsuits before the FSS dispute mediation process is completed for small-amount cases under 20 million KRW.

While the effectiveness of dispute mediation has increased, concerns about side effects are also emerging.

Yang Seung-hyun, a research fellow at the Korea Insurance Research Institute, pointed out, "Since over 80% of financial dispute mediation cases involve amounts under 20 million KRW, there is a problem that lawsuits are prohibited in most cases. When there are many small-amount cases of the same type, prohibiting lawsuits even when financial companies want court judgments can lead to wasted time and costs for both consumers and financial companies."

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