Conflicting Outcomes in 'Jiksiyounggeum' Lawsuits... What Lies Ahead?

Samsung and Kyobo Life Overturn First Trial and Win Appeal
Court Rules "Duty to Explain Fulfilled"
Outcome Depends on Company, Product, and Customer Situations

[Asia Economy Reporter Minwoo Lee] Kyobo Life Insurance overturned its first-instance loss and won the appeal in the immediate annuity unpaid amount lawsuit. This marked a consecutive ‘reversal’ following Samsung Life Insurance. This result somewhat contrasts with the repeated losses experienced by major life insurers such as Mirae Asset Life, Hanwha Life, and Tongyang Life. Although it is difficult to predict easily due to differences in immediate annuity products and guidance methods by company, the atmosphere is nonetheless growing more optimistic.

According to the insurance industry on the 26th, the 4th Civil Division of the Seoul Central District Court ruled in favor of Kyobo Life Insurance on the 21st in the appeal trial of the immediate annuity unpaid amount refund lawsuit filed by four immediate annuity subscribers against Kyobo Life Insurance. This overturned the first-instance ruling that had favored the subscribers.

Immediate annuity is a product where a lump sum is paid as a premium, and the insurer typically pays a fixed amount monthly as an annuity starting about one month after the contract is signed. The insurer pays a monthly amount calculated by deducting business expenses and risk premiums from the premiums paid by the customer, applying the declared interest rate, and adding the accumulated reserve.

Judiciary Sides with Kyobo Life Insurance: "Fulfilled Duty to Explain"

The subscribers who filed the lawsuit claimed that the ‘application’ part meant simply multiplying by the declared interest rate and that they received less annuity than expected. However, the court found it difficult to interpret this application as multiplication. The court stated, “While in deposit and savings products that pay interest based on a contract rate, ‘application’ can be interpreted as ‘multiplying,’ it is difficult to assume the same meaning applies to insurance products.”

Furthermore, regarding the major issue of whether the ‘Premium and Reserve Calculation Method Statement’ (hereafter Calculation Method Statement) can be recognized as part of the policy terms, the court also ruled in favor of the insurer. Subscribers argued that the Calculation Method Statement was not included in the policy terms and thus the insurer failed in its duty to explain. The first-instance court also barely recognized the Calculation Method Statement as part of the policy terms. This context explains why major insurers had suffered consecutive losses.

However, the current court explained, “The contents related to rights and obligations in the Calculation Method Statement should originally be included in the policy terms, but due to expertise, complexity, and regulatory purposes, the competent department separated this content from the policy terms and prepared it as a separate document submitted as a ‘basic document.’ The insurer must comply with the Calculation Method Statement according to the Insurance Business Act regardless of whether it is provided to the customer, and the Financial Services Commission also controlled the appropriateness of this content.” The court judged that since all product explanations provided to customers incorporate the contents of the Calculation Method Statement and the authorities supervise its appropriateness, there is no issue.

Future Litigation Outlook: "Still Uncertain"

Following Samsung Life Insurance, Kyobo Life Insurance’s victory in the appeal has begun to shift the atmosphere. This could also influence the outcomes of ongoing lawsuits involving Mirae Asset Life, Tongyang Life, Hanwha Life, and others.

Disputes related to immediate annuities began in 2017. Subscribers filed complaints with financial authorities, claiming that the deduction details for monthly annuity amounts were not included in the policy terms and that insurers did not provide explanations. The Financial Supervisory Service’s Dispute Mediation Committee recommended insurers pay the unpaid insurance amounts, but insurers rejected this, leading to large-scale litigation. The scale of immediate annuity disputes identified by the Financial Supervisory Service in 2018 was between 800 billion and 1 trillion KRW, involving 160,000 subscribers. Samsung Life Insurance had the largest unpaid insurance amount at about 430 billion KRW, followed by Hanwha Life (85 billion KRW) and Kyobo Life Insurance (70 billion KRW).

However, insurers cannot yet be overly optimistic. Since the composition of product guidance documents and detailed explanations and expressions differed by insurer, rulings may vary. In fact, multiple lawsuits are ongoing or have had mixed results against a single insurer. Hanwha Life, for example, faced a total of nine lawsuits related to immediate annuities. Two cases are under appeal after first-instance losses, five are still in early first-instance stages, one case was confirmed after a first-instance win because subscribers did not appeal, and the last case ended with a settlement recommendation.

An insurance industry official said, “Since situations differ by company and subscriber and products are not completely identical, it is difficult to be optimistic about future outcomes based solely on this victory. Nevertheless, it seems certain that the atmosphere has changed somewhat.”