Strengthening Underwriting Screening
Revision of Model Guidelines for Insurance Fraud Prevention
[Asia Economy Reporter Oh Hyung-gil] Starting this month, insurance companies must check during the underwriting process whether applicants have similar insurance policies with other insurers. This measure aims to prevent insurance fraud from the outset by avoiding multiple subscriptions to similar coverage and subsequent fraudulent claims.
According to the insurance industry on the 2nd, the newly implemented "Model Guidelines for Insurance Fraud Prevention" this month include provisions on setting insurance subscription limits. Although insurers have previously set subscription limits during contract underwriting and internally checked for similar policies with other companies, these guidelines clarify the process further.
In the case of death coverage, insurers will individually assess and set subscription limits based on the insured's financial status. At this time, the amount of death coverage held with other insurers will be considered to adjust the subscription limit. If the insurer judges that the risk of moral hazard is low, they may omit the review within the limit.
This approach views multiple insurance subscriptions by an individual as a potential precursor to insurance fraud and aims to prevent it in advance. However, the insurance industry states that subscription limits will be set without infringing on consumer choice.
An industry official explained, "Having a large amount of insurance relative to one's income does not necessarily equate to insurance fraud," but added, "The goal is to reduce factors that encourage multiple subscriptions for the purpose of claiming insurance money in advance to prevent fraud."
The issue of multiple insurance subscriptions became a painful problem for the insurance industry following the recent "Cambodia Pregnant Wife Death Case," where the deceased was insured under 25 policies across 11 insurers.
The husband, Mr. A, was prosecuted for causing the death of his Cambodian wife, Ms. B, while driving a van near Cheonan IC on the Gyeongbu Expressway on August 23, 2014, after colliding with a parked truck on the shoulder.
At the time, Ms. B, who was seven months pregnant, had insurance contracts amounting to approximately 9.5 billion KRW in benefits. When this fact became known, there were criticisms that insurers irresponsibly allowed overlapping subscriptions to boost their sales performance.
After years of legal battles, in March, the husband was acquitted of murder and insurance fraud charges, and civil lawsuits related to insurance payments have resumed.
Since lawsuits have been filed against multiple insurers, the legal disputes are expected to be prolonged. On the 28th, a lawsuit against Samsung Life Insurance was won, and the first trial verdict for a lawsuit against Mirae Asset Life Insurance is scheduled for the 17th. A lawsuit against Kyobo Life Insurance is also planned for this month.
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