FSS investigates insurance companies’ premium rates

The country’s financial regulator is expected to conduct a study into how local insurance companies calculate insurance premium rates.

The study is considered timely as a consumer group yesterday raised allegations that three local insurers have manipulated insurance fees for their own benefits.

“We have been trying to hold an overall inspection since last July into how insurance companies calculate their product fees and whether or not the fees are reasonable [for consumers],” said an official from the Financial Supervisory Service. “It is the first time that we are actually putting things forward with the plan this year.”

According to the FSS, it will look into how insurance companies come up with their premium rates when they develop a product and also how contracts are arranged and options are offered.

“If we find any problem based on the inspection in the way insurers calculate their product fees, we will come up with disciplinary measures against the company and correct unfair practices,” the official said.

Yesterday, the Financial Consumer Agency released a statement saying that three local insurance companies - Dongbu Fire Insurance, Ergo Daum Direct Auto Insurance and Hanwha Damage Insurance - miscalculated the rates for their products and that the Korea Insurance Development Institute, which is in charge of approving insurers’ products, had overlooked the wrongdoings. The consumer agency said it is planning on filing a joint compensation suit against the three insurers for causing damages to consumers.

“We estimate the number of consumers affected by the miscalculation to be hundreds of thousands of people,” said Cho Nam-hee, head of the Financial Consumer Agency. “The Korea Insurance Development Institute should also be held responsible for not doing its work properly.”

For Hanwha Damage Insurance, the agency said that based on its improper calculation of its insurance fees, some 200,000 subscribers of private medical insurance products paid around 100 million won ($87,547) more than they should have.

The consumer agency is currently finding consumers who wish to take part in filing a class action suit via its online Web site before proceeding with legal procedures.

Insurers, however, say their fees have been approved by the Korea Insurance Development Institute based on legitimate statistical figures.

BY LEE EUN-JOO [angie@joongang.co.kr]