"Not Paying or Underpaying Insurance Benefits": 961 Cases Detected at Insurers Over More Than Five Years

[Financial News] Nearly 1,000 cases in which insurers failed to properly pay insurance benefits have resulted in sanctions from financial authorities over the past five-plus years. DB Insurance accounted for nearly half of the total amount detected, with KRW 262 million in unpaid or underpaid benefits.
According to data submitted by the Financial Supervisory Service to Park Sung-hoon of the People Power Party, a member of the National Policy Committee, the Financial Supervisory Service detected and sanctioned 10 cases of unpaid or underpaid insurance benefits from 2022 through July this year.
The cases involved a total of 961 unpaid or underpaid insurance benefits worth KRW 548.4 million. They included not only cases in which benefits were not paid at all, but also instances in which accrued interest was calculated incorrectly or hospitalization benefits were undercalculated.
DB Insurance recorded the largest amount. The company failed to pay 26 insurance benefits, resulting in a total shortfall of KRW 262 million. That represented 47.8% of the total amount detected, with an average of approximately KRW 10.08 million per case.
KB Insurance was found to have unpaid or underpaid benefits totaling KRW 97.9 million in 10 cases. AXA General Insurance had KRW 73.8 million in 24 cases, while Meritz Fire & Marine Insurance had KRW 40.5 million in 14 cases.
The four non-life insurers accounted for KRW 474.2 million, or 86.5% of the total. Although the 74 cases represented only 7.7% of all detected cases, their share of the amount was overwhelmingly large.
Among life insurers, errors in calculating accrued interest emerged as the main type of violation.
Kyobo Life Insurance had the largest number of cases, underpaying accrued interest in 499 instances. That was more than half of all detected cases. The underpaid amount was KRW 32.7 million, and the Financial Supervisory Service imposed a penalty surcharge of KRW 326 million on the company.
Tongyang Life Insurance was also found to have underpaid accrued interest in 237 cases, totaling KRW 17 million, and received a penalty surcharge of KRW 46 million.
MetLife Insurance Company of Korea underpaid hospitalization benefits in 55 cases by a total of KRW 7.1 million and was fined KRW 27 million. AIA Life Insurance failed to pay KRW 4.5 million in benefits across 28 cases and received a penalty surcharge of KRW 10 million.
At Shinhan Life Insurance, authorities detected 59 cases of underpaid accrued interest totaling KRW 7.2 million and nine cases of unpaid insurance benefits totaling KRW 5.7 million. The respective penalty surcharges were KRW 71 million and KRW 4 million.
The total penalty surcharges imposed on insurers in the 10 cases involving unpaid or underpaid insurance benefits came to KRW 508 million. Kyobo Life Insurance faced the largest surcharge at KRW 326 million, followed by Shinhan Life Insurance with KRW 75 million, Tongyang Life Insurance with KRW 46 million, and MetLife Insurance Company of Korea with KRW 27 million.
Insurance benefits are the most direct reason policyholders pay premiums, meaning errors in the payment process can harm consumers. This has prompted calls for stronger internal controls over the calculation and payment of benefits, as well as more thorough follow-up inspections by financial authorities.
Park said, "Insurers must not repeatedly collect premiums diligently while failing to pay, or underpaying, the benefits they are obligated to provide when an insured event occurs. Paying insurance benefits is the most basic promise an insurer makes to consumers. Financial authorities must thoroughly inspect the extent of unjustified nonpayment and underpayment and strengthen management and supervision to ensure that consumers are not denied the benefits to which they are entitled." 

[email protected] Hong Ye-ji Reporter