Insurance companies suspended

Home > Business > Finance

print dictionary print

Insurance companies suspended


Three insurance companies in Korea were ordered by the country’s financial regulator to halt some of their operations for not paying suicide claims on time, the Financial Supervisory Service said on Thursday.

At the committee meeting, which lasted until 11 p.m., the FSS decided to slap Samsung Life Insurance with three-month suspensions on some of its operations while suspending Kyobo Life Insurance for a month and Hanwha Life Insurance for two.

The FSS also warned executives of the companies, giving the most severe notices to Samsung Life and Hanwha Life, which will bar the current CEOs of the two companies from extending their terms, and a less severe warning to Kyobo’s chief executive.

Upon the punitive decision by the FSS, Kim Chang-soo, the president and CEO of Samsung Life, will not be able to extend his tenure, which ended in January. The extension of his tenure had been postponed, with Samsung Group delaying its annual reshuffle. Cha Nam-gyu, the CEO of Hanwha Life, also will not be able to renew his term, which is to end in March 2018.

Shin Chang-jae, the CEO of Kyobo Life, was able to avoid a severe punishment because of the company’s decision earlier in the day to pay up the pending benefits on all suicide claims, which amounted to 1,858 cases, or 67.2 billion won ($59.3 million), excluding interest.

The controversy about suicide claims began when insurers started selling policies in 2001 that acknowledged suicide within two years after buying the policies as a death due to disaster. The insurers, however, did not pay the policyholders unless they requested it, which meant most of their families were unable to obtain the benefit. When a family took the case to the Supreme Court in 2007, the court ruled in favor of the family and ordered the insurers to pay. After the insurers changed their policies in 2010 to exclude suicide, the FSS in 2014 ordered insurance companies to pay claims before 2010. The Supreme Court this time favored insurance companies, saying they didn’t need to pay the benefits whose statute of limitations had run out. But the FSS pressured the insurers, saying, “policyholders should not be held liable on the benefits whose statute of limitations ran out because the companies did not pay in time.”

The sudden change in the stance by Kyobo Life came because of Shin, who also owns the company. Shin owns 33.78 percent of the Kyobo Life share and being reprimanded by the FSS means he cannot hold an executive position with a finance company for three to five years, which would leave a vacancy in management of the company, which was started in 1958 by his father Shin Yong-ho, who handed over control in 1996.

“Measures [such as suspension of operation] will go into effect after the decision by the Financial Supervisory Commission,” said a spokesperson from the FSS. “We have handed over our decision on the case to the FSC and it will be decided during the FSC’s semimonthly meeting.”

Some civic groups said the case should have been settled much earlier. “Every time when there was a big decision related to the case such as when the Supreme Court initially ruled in favor of policyholders in 2007 before the insurance companies changed their policies in 2010 and in 2014 when the FSS ordered the insurers to pay, the FSS had chances [to impose strict measures],” said Kim Duik-ui, the chief of civic group Financial Justice. “If the FSS was as stern as it is now, the case would have been resolved without such confusion.”

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)