FSS Sanctions Kyobo Life and Heungkuk Life for Distorting Basic Insurance Claim Statistics
[Asia Economy Reporter Changhwan Lee] The Financial Supervisory Service (FSS) has imposed fines and management improvement measures on Kyobo Life Insurance and Heungkuk Life Insurance for distorting basic statistics during the insurance claim payment review process.
The FSS announced on the 1st that Kyobo Life Insurance and Heungkuk Life Insurance did not pay the full amount of cancer hospitalization insurance claims requested by the beneficiaries during the insurance claim payment review process, but entered the full payment in their internal systems, causing distortion in the basic statistics for insurance claim payments.
According to the FSS, both companies developed and sold cancer hospitalization insurance products in November 2018 and February 2019 based on an inflated cancer hospitalization application rate. Accordingly, each company was fined 160 million KRW.
It was also emphasized that the senior actuary responsible for verifying insurance rates negligently issued a "Senior Actuary Confirmation" stating that the calculation of premiums and reserves was accurate without sufficient verification or validation of the adequacy of the basic documents.
Both companies were also criticized for poor management of risk rates using non-experience statistics.
The FSS pointed out that when experience statistics are insufficient, these companies calculate risk rates using non-experience statistics such as academic papers, but they do not replace statistics over 10 years old with the latest data, citing the lack of new research on the academic data used.
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Accordingly, the FSS recommended that in the future, non-experience statistics using academic papers should be reviewed for the availability of alternative data when revising risk rates, and that internal maintenance standards for risk rates with no insurance claim payment records over a long period should be established to improve related operations.
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