Insurance Companies Facing Immediate Annuity Disputes Set Aside Provisions to Prepare for Losses

Hanwha, Dongyang, Mirae Asset, KB Life Insurance Build Up Provisions

[Asia Economy Reporter Ki Ha-young] Amid consecutive losses by insurance companies in lawsuits over unpaid immediate annuity payments, life insurance companies have reportedly set aside reserves in preparation for refunding unpaid amounts.

According to the life insurance industry on the 14th, it was recently confirmed through each company's earnings disclosures that Hanwha Life, Mirae Asset Life, Dongyang Life, and KB Life set aside reserves last year in anticipation of losses related to immediate annuity disputes.

The immediate annuity dispute arose in 2017 when maturity-type immediate annuity subscribers demanded that insurance companies pay the pension amounts they had received less than they were owed. Immediate annuities are products where subscribers deposit a lump sum and receive insurance payments monthly in the form of a pension. Insurance companies deducted a portion of the monthly pension amount to prepare maturity refunds for maturity-type subscribers, but subscribers filed complaints with authorities, claiming that this was not specified in the policy terms and was not explained.

The Financial Supervisory Service's Dispute Mediation Committee recommended that life insurers pay additional insurance benefits, but Samsung Life, Hanwha Life, Kyobo Life, Dongyang Life, Mirae Asset Life, and KB Life refused, leading to litigation. The scale of the immediate annuity unpaid dispute identified by the Financial Supervisory Service in 2018 was 160,000 people and 800 billion to 1 trillion KRW. Among them, Samsung Life had the largest amount with 55,000 people and 430 billion KRW. Hanwha Life and Kyobo Life were identified with 85 billion KRW and 70 billion KRW, respectively.

In November last year, subscribers won the first trial in a joint lawsuit led by the financial consumer group Financial Consumer Federation against Mirae Asset Life, and last month, they also won a ruling against Dongyang Life.

However, Samsung Life, which has the largest amount of unpaid funds, and Kyobo Life, which ranks third, have not set aside reserves despite recent lower court rulings.

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