Proposed Amendment to the Insurance Business Act: "Policyholders Must Recover Underpaid Insurance Claim Differences"

Assemblyman Song Jae-ho Proposes Amendment to the Insurance Business Act to Establish Grounds for Refund of Unpaid Insurance Amounts Due to Non-compliance with Basic Documents

[Asia Economy Reporter Park Sun-mi] Song Jae-ho, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea (Jeju-si Gap), has taken the lead in proposing a partial amendment to the Insurance Business Act that allows insurance companies to compensate for the difference in insurance payments when they violate the obligation to comply with basic documents.

On the 23rd, Representative Song Jae-ho proposed an amendment to the Insurance Business Act that requires insurance companies to recalculate the appropriate insurance payment according to the basic documents and report it to the Financial Services Commission if they are fined or penalized for violating the obligation to comply with basic documents. If the recalculated appropriate insurance payment exceeds the paid insurance amount, the difference must be paid to the policyholder.

According to the current Insurance Business Act, insurance companies are obligated to comply with the basic documents related to insurance products. If violated, the insurance company may be fined up to 50% of the annual premium income of the relevant insurance contract, and directors or managers of the insurance company may be fined up to 20 million KRW.

However, according to facts revealed by Representative Song during last year's government audit, the total amount of underpaid insurance claims due to violations of the obligation to comply with basic documents by 17 domestic insurance companies over the past five years reached 7.763 billion KRW.

In such cases, while administrative penalties such as fines and surcharges are imposed on insurance companies that violate the obligation to comply with basic documents, there is no legal basis to ensure that customers who were underpaid insurance claims receive proper compensation. Even if insurance companies underpay claims contrary to the basic documents, many customers fail to secure their rightful rights due to the complex and difficult insurance terms and conditions, and the lack of related legal measures has been pointed out as a problem.

Representative Song, who proposed the bill, stated, “Insurance contracts inherently place consumers at a disadvantage compared to insurance companies,” and criticized, “Failing to pay insurance claims according to the basic contract documents insults consumers who have faithfully paid premiums and fulfilled their insurance contracts.”

He continued, “It is right to properly pay the appropriate insurance amount for unduly underpaid insurance claims,” explaining the purpose of the amendment, and emphasized, “I will work hard to pass the amendment so that the legitimate rights of insurance consumers can be guaranteed.”

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