"We Accept Instead of Insurance Payouts... Warning on Illegal Insurance Complaint Sales"

[Asia Economy Reporter Changhwan Lee] # Office worker A contacted a civil complaint agency after seeing an online advertisement claiming that they could help recover the full amount of insurance premiums already paid. The agency demanded an initial fee of 100,000 KRW and then requested a success fee from a portion of the refunded insurance premiums upon successful recovery. However, such actions are highly likely to be subject to legal penalties for violating the Attorney-at-Law Act.

There are growing warnings that insurance policyholders should be cautious when entrusting insurance premium refunds or related matters to civil complaint agencies and paying them fees, as this may lead to legal penalties.

On XX date, the Korea Insurance Research Institute stated that if a civil complaint agency receives or promises to receive money from insurance contract holders and handles legal affairs such as insurance premium refunds, surrender value claims, or insurance benefit claims, it may constitute a violation of the Attorney-at-Law Act, and insurance consumers should be careful.

In this regard, the Supreme Court finalized a ruling last June that a civil complaint agency receiving money from insurance contract holders and handling surrender value claim-related civil complaint work constitutes a violation of the Attorney-at-Law Act.

According to the ruling, insurance civil complaint agency B contracted to receive a contract fee of 100,000 KRW and a consulting fee (10% of the refund amount) from the insurance contract holders. The court judged that the agency, not being a lawyer, received or promised to receive money while handling legal affairs, constituting a violation of the Attorney-at-Law Act, and imposed a fine of 3 million KRW.

With the Supreme Court’s ruling finalized, it is expected that insurance civil complaint agency activities will be more strictly restricted. Accordingly, financial authorities emphasized that insurance consumers should be cautious when using civil complaint agencies.

A Financial Supervisory Service official said, "Under the Attorney-at-Law Act, civil complaint agencies that are not lawyers cannot demand money or other valuables from consumers while handling complaints such as insurance premium refunds or insurance benefit receipts," adding, "If you have suffered damages due to incomplete sales, anyone can directly file a complaint with the Financial Supervisory Service."

There are also warnings that the scope of work of loss adjusters may sometimes raise issues regarding violations of the Attorney-at-Law Act.

Some independent loss adjusters are analyzed to have illegal implications when they act on behalf of clients to claim insurance benefits or negotiate or compromise with insurance companies regarding insurance payments.

Baek Young-hwa, a research fellow at the Korea Insurance Research Institute, stated, "There have been many cases where loss adjusters were convicted of violating the Attorney-at-Law Act for receiving or promising to receive money and claiming insurance benefits on behalf of clients or mediating or facilitating settlements regarding insurance benefit decisions."