Claims Adjusters Accused of Favoring Insurers... Will Fairness Increase? (Comprehensive)

Proposal for Amendment to the Insurance Business Act Suggesting Insurance Payout Opinions Due to Insurer Circumstances

[Asia Economy Reporter Oh Hyung-gil] There is a growing call to strengthen the role of loss adjusters to fairly assess damages and pay insurance claims when insurance accidents occur. With the passage of the 'Fair Economy 3 Acts' in the National Assembly, regulations on loss adjusting subsidiaries, which have been criticized for being subordinate to insurance companies and leading efforts to reduce insurance payouts, are also expected to be tightened.

According to the insurance industry on the 30th, Jeon Jae-su, a member of the Democratic Party of Korea, proposed a partial amendment to the Insurance Business Act that allows loss adjusters to express opinions on the damages and insurance payments assessed by insurance companies during the insurance claim payment process.

Loss adjusters have typically been operated in a form directly employed or commissioned by insurance companies, but since 2018, insurance policyholders have also been able to directly appoint loss adjusters. Under current law, policyholders can appoint loss adjusters who assess damages and insurance payments from the consumer side during the insurance claim process and express opinions.

However, the regulations governing loss adjusters' duties do not include provisions for expressing opinions related to damages and insurance payments assessed by insurance companies. As a result, during negotiations over insurance payments, loss adjusters cannot present the amounts proposed by insurance companies as their opinions. The amendment aims to expand the duties of loss adjusters by adding the act of exchanging opinions with insurance companies regarding damages and insurance payments and explaining the content to policyholders.

However, there is an issue that the mediation and settlement roles of loss adjusters may potentially violate the Attorney-at-Law Act. In the previous 20th National Assembly, financial authorities pointed out that the act of exchanging opinions between loss adjusters and insurance companies could be considered a violation of the Attorney-at-Law Act, causing the same amendment to fail.

An insurance industry official said, "When loss adjusters perform legal acts such as mediation and settlement of insurance payments, the Bar Association responds with prosecution, and independent loss adjusters have been legally punished," adding, "There is a need to legally clarify the role of loss adjusters."

Meanwhile, it is expected that insurance companies' acts of withholding or reducing insurance payments through subsidiary loss adjusters will be subject to legal regulations in the future.

Among the 'Fair Economy 3 Acts,' the amendment to the 'Monopoly and Fair Trade Act (Fair Trade Act)' unified the regulation target for private benefit extraction by the controlling family to 20% for both listed and unlisted companies, and significantly expanded the scope of regulation to include subsidiaries in which these companies hold more than 50% of shares.

Hong Sung-guk, a Democratic Party member, pointed out during the October National Assembly audit, "Once the Fair Economy 3 Acts pass, subsidiaries in which affiliates hold more than 50% of shares will all be subject to regulations against preferential treatment, and the practice of self-loss adjusting must be corrected."

According to Representative Hong, in the first half of this year, the domestic Big 3 life insurance companies (Hanwha Life, Samsung Life, Kyobo Life) paid 100% (83.1 billion KRW) of loss adjusting outsourcing fees to their subsidiaries.

Also, the three non-life insurance companies (Samsung Fire & Marine, Hyundai Marine & Fire, DB Insurance) paid 76.4% of the total 348 billion KRW, amounting to 266 billion KRW, to their subsidiaries. All 11 loss adjusting firms, which handle most of the loss adjusting work for these six companies, are 100% owned by the insurance companies.