Samsung Life Insurance defies FSS over payouts

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Samsung Life Insurance defies FSS over payouts

Samsung Life Insurance said Thursday it will partly compensate about 55,000 clients of a financial product, defying a financial watchdog’s order to fully cover the payment as a policy holder requested.

The decision was made at a meeting of the board of directors after the Financial Supervisory Service (FSS) accused the life insurer of deducting part of a payout as a working expense without specifically mentioning it in the contract.

The insurance company said that it will turn to the courts to make a ruling on the issue, indicating that it will launch a legal battle against the FSS.

“It is beyond the realm of the board of directors’ judgment,” the company said in a statement.

“We will decide whether we will [fully] compensate the clients in accordance with the court’s ruling,” it said.

It was not immediately clear how much compensation Samsung Life would give to clients of a product called immediate payment annuity.

A client buys immediate payment annuity with a single, lump-sum payment and an insurer pays a guaranteed income to the client about a month after the contract is signed.

If the company fully pays compensation to all 55,000 clients, the amount is estimated to be around 400 billion won ($357 million).

Last year, a client of Samsung Life’s immediate payment annuity filed a complaint with the financial watchdog, the FSS, claiming that the insurer must guarantee minimum returns of 2.5 percent per annum.

The minimum returns were used to calculate a guaranteed income of the annuity contract, but were not specifically mentioned in the contract, according to FSS officials.

In November last year, the FSS ruled in favor of the client and advised Samsung Life to compensate all clients of immediate payment annuities.

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