"Increase in Insurance Companies' Denial of Claims... Serious Consumer Damage"

[Asia Economy Reporter Changhwan Lee] Claims have been raised that consumer damages are increasing as insurance companies are increasingly refusing to pay insurance benefits due to policyholders' violations of their duty of disclosure.

On the 20th, Hwang Unha, a member of the Democratic Party of Korea, stated that the rate of non-payment of insurance benefits by insurance companies is steadily increasing, and that the duty of disclosure procedures for insurance enrollment should be improved to reduce consumer damages.

The duty of disclosure for insurance enrollment refers to the information that the policyholder must inform the insurance company before enrolling in insurance. If a violation of the duty of disclosure is found during the insurance benefit payment review, the insurance company either refuses to pay the insurance benefit or pays only a portion of it.

According to data on the "rate of (full) non-payment of insurance benefits due to violation of the duty of disclosure" submitted to Hwang Unha's office by the General Insurance Association and the Life Insurance Association, the rate of non-payment due to violations of the duty of disclosure by major insurance companies has increased about threefold over the past five years.

Samsung Life Insurance increased from 560 cases in 2016 to 1,548 cases in 2021; Meritz Fire & Marine Insurance from 1,200 cases in 2016 to 4,016 cases in 2021; Hyundai Marine & Fire Insurance from 719 cases in 2016 to 2,248 cases in 2021; and Samsung Fire & Marine Insurance from 752 cases in 2016 to 2,037 cases in 2021.

Cases of failure to fulfill the duty of disclosure mainly occur when the policyholder fulfills the duty of disclosure to an insurance agent rather than the insurance company, or when they fail to fulfill it due to lack of guidance on the procedures and specific scope of the duty of disclosure.

As cases of insurance benefit non-payment due to failure to fulfill the duty of disclosure increase, there are calls to improve the related processes.

Additionally, Representative Hwang pointed out that the General Insurance Association and the Life Insurance Association have not submitted data to the National Assembly on partial non-payment cases and the amounts of non-payment, citing lack of statistical data, making it impossible to grasp the current status of consumer damages.

As a measure to improve consumer damages caused by non-payment of insurance benefits due to violations of the duty of disclosure, there is a position to grant insurance agents the right to receive disclosure information; however, the general insurance and life insurance industries have expressed opposition to granting insurance agents this right.

Representative Hwang emphasized, "To increase insurance enrollment rates, the process of fulfilling the duty of disclosure before enrollment has been made lax, while the fulfillment of the duty of disclosure is strictly reviewed during insurance benefit payment assessments, resulting in serious consumer damages. To reduce consumer damages and enhance trust in the insurance industry, process improvements are necessary."

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