Samsung Life Also Loses First Trial on Immediate Annuity... Unpaid Amounts in Insurance Industry Total 1 Trillion Won

Loss Following Mirae Asset, Dongyang, and Kyobo Life
Risks Related to Immediate Annuities Expected to Increase

[Asia Economy Reporter Ki Ha-young] Samsung Life Insurance has lost the first trial in the immediate annuity non-payment lawsuit and is now faced with the obligation to pay approximately 400 billion KRW in insurance benefits. This follows losses by Mirae Asset, Dongyang, and Kyobo Life Insurance. As insurers continue to lose, the total estimated amount of insurance benefits to be paid reaches 1 trillion KRW.

According to the legal and insurance industries on the 22nd, the Civil Agreement Division 25 of the Seoul Central District Court ruled in favor of 57 immediate annuity subscribers who filed a lawsuit against Samsung Life Insurance, ordering the company to pay the plaintiffs 598 million KRW in unpaid amounts. This comes about three years after the Korea Financial Consumer Federation gathered victims related to Samsung Life's immediate annuity and filed a joint lawsuit in October 2018.

The first trial court stated, "To fulfill the obligation of explanation and specification, it is necessary to specifically explain and specify that a portion of the amount will be withheld, but such content is neither in the terms and conditions nor was it likely explained during the product sales process," thus ruling in favor of the plaintiffs. Samsung Life argued that since the pension contract reserve amount is calculated according to the calculation method specified in the calculation manual, and the calculation manual includes the pension monthly amount formula, it is reasonable to consider that this content is incorporated into the terms and conditions. However, this argument was not accepted.

Immediate annuity is a product where subscribers deposit a lump sum and receive monthly insurance payments in the form of an annuity starting one month later. The plaintiffs are 'inheritance maturity type' subscribers who receive annuities for a certain period and then receive a refund of the principal upon maturity.

The immediate annuity non-payment dispute arose when subscribers filed complaints with financial authorities in 2017. Life insurers selling immediate annuities, including Samsung Life, calculate the monthly annuity amount by deducting a portion from the amount obtained by applying the announced interest rate to the net premium (the premium paid minus business expenses) to secure funds for maturity refunds for maturity-type subscribers. Subscribers filed complaints with financial authorities, claiming that such deductions were not specified in the terms and conditions and that insurers did not provide clear explanations.

The Financial Supervisory Service's Dispute Mediation Committee decided that insurers must pay the underpaid insurance benefits, and the FSS recommended insurers pay the remaining subscribers. However, Samsung Life, Hanwha Life, Kyobo Life, Dongyang Life, Mirae Asset Life, and KB Life rejected this, leading to lawsuits. The scale of the immediate annuity non-payment dispute identified by the FSS in 2018 was 160,000 people and 800 billion to 1 trillion KRW. Among them, Samsung Life had the largest share with 50,000 people and 400 billion KRW.

With Samsung Life also losing the immediate annuity lawsuit, risks related to immediate annuity non-payment have increased in the insurance industry. Samsung Life stated it will review specific countermeasures after receiving the judgment. Previously, Mirae Asset Life, Dongyang Life, and Kyobo Life all appealed after losing the first trial in the immediate annuity non-payment lawsuits. The industry expects Samsung Life to likely appeal as well, so the conclusion of the immediate annuity non-payment lawsuits is expected to be reached only at the Supreme Court, with the litigation anticipated to be prolonged.

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