'Non-Disclosure Obligation Violation' Insurance Payment Non-Payment Practice... Will It Disappear from Now On? (Comprehensive)

Duty to Inform Important Matters When Signing Insurance Contracts
Limits Difficult for Consumers to Judge
Assemblyman Jeong Uncheon Proposes Amendment to Commercial Act

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] "I was prescribed medication for a cold before signing an insurance contract. Do I need to inform the insurance company?"

Most consumers are unaware of the duty of disclosure when purchasing insurance. However, this duty is very important because failure to comply can lead to contract termination or denial of insurance claims.

Going forward, measures will be implemented to reduce the burden on consumers in fulfilling this duty of disclosure. It is also expected to reduce consumer disputes arising from non-compliance.

According to the insurance industry on the 9th, Jeong Un-cheon, a proportional representative of the People Power Party, recently proposed a partial amendment to the Commercial Act that requires insurance companies to request disclosure from policyholders through written questions.

The current Commercial Act imposes an active duty of disclosure on the policyholder or insured (insurance consumer) regarding important matters at the time of contracting insurance, and allows the insurer (insurance company) to terminate the contract if this duty is violated.

Cases of insurance claim denials due to breach of the duty of disclosure are frequent. According to the Financial Supervisory Service, the number of unpaid insurance claims due to non-disclosure increased by 52%, from 15,424 cases in 2016 to 23,450 cases in 2019. In the first half of last year alone, there were 13,503 cases.

Insurance Claim Denials Due to Breach of Duty of Disclosure Up 52% in 5 Years

In particular, since insurance consumers find it difficult to determine what constitutes important matters that may vary across different insurance products, there have been criticisms that the current law is unreasonable for consumers.

The amendment aims to require disclosure through clear and precise written questions regarding insurance contracts, and to hold insurers responsible for paying claims on matters they did not request disclosure for. Jeong previously introduced a similar amendment to reduce the policyholder’s duty of disclosure in the 20th National Assembly, but it was not processed within the term and was discarded.

The Ministry of Justice is also pushing for an amendment to the Commercial Act to change the policyholder’s ‘voluntary duty of disclosure’ to a ‘responsive duty of disclosure.’ Last month, the Consumer Policy Committee (co-chaired by Prime Minister Chung Sye-kyun and Professor Yeo Jeong-seong of Seoul National University), a government body related to consumer policy, recommended amending the Commercial Act to ease the disclosure burden on policyholders.

The committee stated, "Insurance products are complex and diverse, and although insurance companies have high expertise in insurance matters, it is unreasonable to impose the duty of disclosure unilaterally on consumers," and requested the Ministry of Justice to amend the law so that if consumers respond and disclose all information requested in the insurer’s written questions, they are considered to have faithfully fulfilled their duty of disclosure."

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