FSS in dilemma over suicide insurance payoutsThe Financial Supervisory Service has been in a dilemma for the past eight months about whether to order life insurers to pay benefits in cases of suicide.
Ordering them to pay may encourage policy holders to commit suicide. But allowing the companies to not pay is encouraging a dereliction of their duty and its own.
According to the Korea Finance Consumer Federation, the amount of insurance payments local life insurers have withheld in suicide cases is up to 2 trillion won ($1.9 billion).
Last August, the FSS discovered that ING Life Insurance did not pay settlements of about 20 billion won in more than 90 cases of suicide from 2003 to 2010.
The financial authority discovered that it was common practice to cheat families of suicide cases among other life insurers, including Samsung, Hanwha, Kyobo and Shinhan Life.
Standard life insurance policies treat suicides the same as regular deaths. Before terms were revised in April 2010, they stipulated insurers pay out for suicides an amount equivalent to a death caused by an industrial accident or natural disaster, which was about twice as much as in a regular death.
The life insurance companies now say the terms were written mistakenly and that they are not obligated to pay benefits to suicide cases, which they don’t consider accidents.
“Back then, the standardized terms contained some mistakes, which most insurers, without a second thought, kept copying and using,” said a spokesman for the insurance companies. “But it is clear that suicide is not an accident.”
Consumer groups say the law obliges them to count suicide cases that occurred in the 2003-10 period as accident cases, as per the policies that were signed.
The Supreme Court of Korea made a ruling in 2007 that insurers have to pay according to what was written in policies, even if there were errors.
Despite the Supreme Court ruling, the FSS hasn’t decided what to do about the cases.
The FSS was involved in the creation of the standardized terms of policies prior to the 2010 revision, and it is unclear as to how much it is responsible for the obligations incurred by the insurance companies. A call to the FSS for clarification was not returned.
BY PARK JIN-SEOK, KIM JI-YOON [email@example.com]