Samsung Life Insurance Receives 'Institutional Warning'... Disciplinary Decision Likely Delayed Until Second Half (Comprehensive)

Ahead of the Last FSC Regular Meeting of the First Half
High Possibility of Not Submitting Severe Disciplinary Proposals
Conflict Resolution with Cancer Patients Also Faces Difficulties

[Asia Economy Reporter Oh Hyung-gil] It appears that the financial authorities' decision on Samsung Life Insurance's 'severe disciplinary action' is ultimately being postponed to the second half of the year.

Samsung Life Insurance received an institutional warning last December due to unpaid hospitalization fees for cancer insurance at long-term care hospitals. As the final decision has been repeatedly delayed over six months, concerns are growing about increasing management uncertainty.

According to the financial authorities and the insurance industry on the 16th, the severe disciplinary proposal for Samsung Life Insurance is unlikely to be submitted at the last Financial Services Commission regular meeting of the first half, scheduled for the 23rd. A Financial Services Commission official stated, "As far as I know, it is still under discussion in the agenda review subcommittee," adding, "Although it is delayed, please understand that it means we are reviewing it carefully."

The Financial Supervisory Service conducted a comprehensive inspection of Samsung Life Insurance in 2019. It uncovered violations such as unpaid cancer insurance hospitalization fees at long-term care hospitals and breaches of major shareholder transaction restrictions. In December last year, the Disciplinary Committee resolved an institutional warning, which is a severe disciplinary measure. It immediately recommended imposing fines and penalties to the Financial Services Commission.

Additionally, in March, the Financial Supervisory Service notified Samsung Life Insurance of management caution, citing that Samsung Life Service Loss Adjustment, a claims adjustment subsidiary of Samsung Life Insurance, used guidelines that assumed non-payment of insurance benefits when reviewing claims for cancer hospitalization insurance at long-term care hospitals.

The previously smooth progress was halted this year. The unusually prolonged discussions in the agenda subcommittee have led to rumors that the severe disciplinary action against Samsung Life Insurance is being reconsidered from scratch.

A variable also emerged when the Supreme Court ruled in favor of Samsung Life Insurance in a lawsuit filed by a cancer patient group leader last October, demanding payment of hospitalization fees at long-term care hospitals. The court judged that hospitalization fees at long-term care hospitals are not directly related to cancer treatment and thus do not qualify as grounds for payment.

However, the Financial Supervisory Service judged that since disputes over hospitalization fees at long-term care hospitals vary case by case, the Supreme Court precedent alone cannot be generalized to all cancer patients.

[Image source=Yonhap News]

Decision May Be Delayed into Second Half... Increasing Management Variables

There is a high possibility that the conclusion will be delayed into the second half of the year as well. The agenda subcommittee is burdened with major pending issues. Currently, discussions are ongoing in the agenda subcommittee regarding disciplinary measures for Shinhan Financial Investment, KB Securities, and Daishin Securities related to the Lime Fund sales.

The agenda subcommittee's standing members are also not accelerating discussions due to recent personnel changes. Standing member Choi Hoon was appointed ambassador to Singapore on the 28th of last month, and non-standing member Shim Young's term expires on the 25th.

As the disciplinary confirmation for Samsung Life Insurance and its financial affiliates is delayed, uncertain management variables are increasing. If the institutional warning is finalized, not only Samsung Life Insurance but also its subsidiaries will be prohibited from entering new business areas requiring financial authorities' approval for one year.

Following the suspension of the MyData business license review applied for by Samsung Card last year, Samsung Life Insurance's acquisition of a 25% stake in the UK real estate management company Savills IM last month also requires approval from the financial authorities.

Meanwhile, conflicts with cancer patients continue regarding unpaid cancer insurance hospitalization fees at long-term care hospitals. The cancer patient group responding to insurance companies (Boammo) has been occupying Samsung Life Insurance's customer plaza for over 500 days since January last year. Despite a court order banning the assembly, they have not withdrawn and are demanding that the Financial Services Commission finalize the severe disciplinary action against Samsung Life Insurance and enforce the payment order for the unpaid cancer hospitalization insurance benefits to date.