Non-life Insurers Arbitrarily Cut Insurance Payments...Financial Authorities Impose Institutional Warning and Fines (Comprehensive)

Meritz Fire & Marine Insurance, KB Insurance, NongHyup Insurance
Terminated Contracts for Failing to Fulfill Disclosure Obligations
Paid Only Actual Loss Insurance Benefits, Withheld Hospitalization Fees

[Asia Economy Reporter Oh Hyung-gil] Financial authorities have imposed institutional warnings and fines on Meritz Fire & Marine Insurance, KB Insurance, and NH Nonghyup Insurance for unjustly reducing or withholding insurance payments.

They either terminated contracts citing customers' failure to fulfill notification obligations or paid only actual medical expenses while withholding daily hospitalization allowances or diagnostic fees.

According to the financial authorities on the 7th, the Financial Supervisory Service (FSS) notified Meritz Fire & Marine Insurance of a comprehensive inspection result, imposing an institutional warning, a fine of 1.216 billion KRW, and a surcharge of 240 million KRW, totaling 1.456 billion KRW in penalties. Additionally, seven related executives received disciplinary actions including reprimands (2 persons), warnings (2 persons), and cautionary notices (3 persons).

Meritz Fire & Marine Insurance was selected as the first casualty insurance company subject to the FSS's comprehensive inspection, which was reinstated after more than four years, and underwent inspection from May to July last year.

The comprehensive inspection revealed that from 2013 to 2019, Meritz Fire & Marine Insurance unjustly reduced or withheld insurance payments amounting to 686 million KRW on a total of 811 insurance contracts, contrary to the provisions stipulated in the policy terms.

'Special lens presbyopia surgery' uses the same method as cataract surgery but is a surgical technique that simultaneously addresses both cataracts and presbyopia.

They terminated insurance contracts citing violations of notification obligations before and after contracts, or unjustly reduced insurance payments despite no causal relationship with past medical history. When covering actual medical expenses, they partially paid the insured's share of medical costs after industrial accident processing or paid cataract surgery fees for only one eye instead of both eyes twice.

They also failed to pay compensation for depreciation in vehicle value due to car accidents. For vehicles less than two years old, if repair costs from an accident exceed 20% of the vehicle's value immediately before the accident, 10% to 15% of the repair costs must be paid as compensation for depreciation in vehicle value.

Regarding dementia insurance, they unjustly calculated the incidence rate of severe dementia and neglected the verification of insurance rates. Although insurance claims were received, payments were delayed beyond the 30 business days payment deadline without reasons stipulated in the policy or other laws.

Furthermore, Meritz Fire & Marine Insurance was found to have violated communication method recruitment compliance and prohibited acts in concluding insurance contracts as stipulated by the Insurance Business Act.

KB Insurance was also found to have reduced or withheld insurance payments amounting to 945 million KRW on 4,509 insurance contracts from 2016 to 2018. They paid only actual medical expenses stipulated in the insurance policy but did not pay fixed insurance amounts such as daily hospitalization allowances for illness or injury and fracture diagnosis fees. The FSS imposed an institutional warning and a surcharge of 789 million KRW on KB Insurance. One related executive received a reprimand.

NH Nonghyup Insurance also received a surcharge of 16 million KRW. It was investigated that from 2016 to 2018, NH Nonghyup Insurance unjustly reduced or withheld insurance payments amounting to 130 million KRW on 117 insurance contracts.