Lawsuit Amounts Exceed 2 Trillion Won... Insurance Company Lawsuits Increased Last Year

Lawsuits Over Immediate Annuities Intensify
Litigation Burden After Introduction of the Financial Consumer Protection Act

[Asia Economy Reporter Oh Hyung-gil] It has been confirmed that the total litigation amount involving major insurance companies exceeded 2 trillion won last year. The litigation amount surged as lawsuits related to immediate annuities, involving unpaid amounts worth hundreds of billions of won, began in earnest. As the financial sector has the highest number of consumer complaints regarding insurance payments, there is a high possibility of legal disputes; however, there have also been cases of excessive lawsuits, such as filing lawsuits against elementary school students.

With the introduction of the Financial Consumer Protection Act (FCPA), which will be enforced from the 25th, insurance companies are expected to face increased burdens when conducting lawsuits against policyholders, leading to significant changes in insurance-related litigation in the future.

According to the insurance industry on the 22nd, as of the end of last year, the total litigation amount of lawsuits currently pending with the top three life insurance companies and the top four non-life insurance companies as plaintiffs or defendants reached 2.11 trillion won.

Samsung Life Insurance recorded a total of 1,211 lawsuits last year, with 227 cases pending as defendant and 984 cases pending as plaintiff. This is a slight increase from 1,157 cases the previous year. The litigation amount was 174.9 billion won, a remarkable 91% increase compared to the previous year.

A representative lawsuit against Samsung Life Insurance is the class action lawsuit on immediate annuities filed by the Korea Financial Consumers Federation in 2018, which is scheduled to resume next month. The scale of the unpaid immediate annuity dispute is estimated at 430 billion won.

Hanwha Life Insurance's litigation amount also increased by 11%, from 91.2 billion won in 2019 to 101.3 billion won last year. Hanwha Life is also involved in lawsuits related to immediate annuities (Baro Annuity Insurance) and death benefit payments.

Kyobo Life Insurance, a non-listed company, had 929 lawsuits as of the third quarter last year, nearly double the 499 cases from the previous year. The litigation amount surged fivefold from 53.9 billion won to 280.3 billion won.

The number of lawsuits and litigation amounts for non-life insurers were relatively higher than those for life insurers. Samsung Fire & Marine Insurance had 3,045 cases and 452.7 billion won, increasing by 22% and 9% respectively compared to the previous year.

DB Insurance and Hyundai Marine & Fire Insurance saw slight decreases in litigation amounts, with 456 billion won and 484.8 billion won respectively, down from 479.8 billion won and 508.2 billion won the previous year. Meritz Fire & Marine Insurance showed little change with 2,490 cases and 184.7 billion won compared to 2,422 cases and 184.8 billion won the previous year.

A representative from a non-life insurer explained, "Insurance companies account for estimated damages related to lawsuits as insurance contract liabilities. Although it takes considerable time for lawsuit results to be finalized, the impact on financial soundness is not significant."

However, insurance companies are concerned that the burden of conducting lawsuits against financial consumers will increase further once the FCPA is enforced. The FCPA stipulates that litigation procedures can be suspended until the mediation process is completed for cases where dispute mediation has been requested.

In particular, when consumers file lawsuits claiming damages against financial companies due to violations of the duty to explain, the financial company bears the full responsibility to prove whether there was intentional or negligent fault. The financial authorities also plan to expand the scope of disclosure related to lawsuits, including the number of lawsuit reviews by insurance company litigation management committees.

An insurance industry official stated, "Although there is criticism that lawsuits against consumers are excessive, some aspects are unavoidable to determine the facts," adding, "Consumer protection is being strengthened in accordance with the FCPA."