Strengthening Underwriting Screening
Revision of Model Guidelines for Insurance Fraud Prevention
[Asia Economy Reporter Oh Hyung-gil] From this month, insurance companies must check during the insurance underwriting process whether the applicant has similar insurance policies with other companies. This is 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 insurance companies have previously set subscription limits during contract signing and internally checked for similar policies with other companies, these guidelines clarify the process further.
In the case of death coverage, the insurance subscription limit will be determined individually based on the insured's financial status. At this time, the amount of death coverage from other insurers will be considered to adjust the subscription limit. If the insurer judges that the risk of moral hazard is low, it may omit the underwriting process within the limit.
The intent is to view multiple insurance subscriptions by an individual as a potential precursor to insurance fraud and prevent it in advance. However, the insurance industry states that subscription limits will be set without infringing on consumer choice.
An industry official explained, "Paying for 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 lead to subscribing to multiple policies for the purpose of insurance claims in advance to prevent fraud."
Following the recent "Cambodia Pregnant Wife Death Incident," where the deceased was insured under 25 policies across 11 insurers, the issue of multiple insurance subscriptions has become a painful problem for the insurance industry.
The husband, Mr. A, was prosecuted for causing the death of his Cambodian wife, Mrs. 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, Mrs. B, who was seven months pregnant, was insured for approximately 9.5 billion KRW in insurance payouts. Mr. A had subscribed to 25 insurance policies naming his wife as the insured and himself as the beneficiary from 2008 to 2014. Investigations revealed that even when his financial situation worsened, he continued to insure his wife.
After these facts became public, there were criticisms that insurance companies irresponsibly allowed overlapping subscriptions for the sake of performance.
After years of legal battles, in March, Mr. A was acquitted of murder and insurance fraud charges, and civil lawsuits related to insurance payouts 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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