Lee Chan-jin, the head of the Financial Supervisory Service, is emphasizing consumer protection, heightening tensions in the insurance industry, which ranks first in consumer complaints. In particular, while warning that "both the perpetrator and the management will be held accountable" for unhealthy business practices, the risks for insurance companies due to the separation of manufacturing and selling are expected to grow.
According to the Financial Supervisory Service on the 6th, among a total of 116,338 financial complaints last year, non-life insurance complaints accounted for 40,365 cases (34.7%), and life insurance complaints numbered 13,085 cases (11.2%), totaling 53,450 cases. Insurance complaints made up 45% of all complaints, the highest among the financial sector.
Among the insurance complaints, the largest number was related to the assessment and payment of insurance claims, totaling 25,001 cases. If we also include complaints regarding coverage decisions for payment or non-payment of claims (5,673 cases), it is evident that the vast majority of insurance complaints are related to insurance payouts.
At a meeting with the CEOs of major insurance companies, the first issue pointed out by the head of the Financial Supervisory Service was that "while purchasing insurance is easy, receiving the insurance payout is difficult." He noted, "We must present the terms of coverage clearly and reasonably to prevent disputes related to insurance payments and ensure the objectivity and reliability of the insurance payouts by explaining them thoroughly to consumers."
It is a principle that claims adjusters assess the eligibility and amount of insurance payouts, and insurance companies make the final decisions regarding payouts based on this. However, there have been ongoing concerns that most claims adjustment companies are affiliated with or contracted by insurance companies, effectively leading the insurance companies to control both the claims adjustment and payout decisions. Consumers can appoint independent claims adjusters free of charge, but this is limited to certain fields like actual expenses insurance. For consumers, filing complaints with the FSS is virtually the only response method.
The risks associated with the separation of manufacturing and selling are expected to increase. In the past, insurance companies sold their products through in-house sales agents affiliated with the company. However, recently, the separation of manufacturing and selling has accelerated, with insurance companies designing and manufacturing products while sales organizations such as general agencies (GA) handle the sales. Currently, the insurance sales market is divided into three branches: affiliated sales agent organizations, subsidiary-type GAs owned by insurance companies, and independent GAs separate from insurance companies. As of last year, the number of GA-affiliated agents (288,446) exceeded the number of affiliated agents (184,468).
The problem lies in the fact that under the Financial Consumer Protection Act, insurance companies (direct sales operators) are primarily liable for compensating damages incurred by consumers, not the insurance agents (sales representatives). The GA is responsible for how to explain and promote certain products, yet the insurance companies may bear responsibility for incomplete sales that arise during this process. Although the separation has occurred, the structure still requires insurance companies to partially bear the management and supervisory responsibilities toward GAs.
In a research report released in February, the Insurance Research Institute noted, "As new sales channels diversify and grow larger, the control of insurance companies is weakened, making it difficult to prevent incomplete sales, due to the regulations imposing primary liability." It stated that considering the acceleration of the separation of manufacturing and selling, it is desirable for sales functions and sales responsibilities to be linked.
The head of the Financial Supervisory Service has also requested strengthening the consumer protection system from the design and approval stages of insurance products, which is another headache for the insurance industry. This is interpreted as a message to restrain competition, such as increasing insurance payout limits, even amidst intensified competition centered on health insurance. He cited cases of excessive payouts for illnesses and injury insurance exceeding actual treatment expenses as examples of poorly designed insurance products. An insurance industry official noted, "There is an atmosphere forming where the FSS may prioritize examining the insurance industry, which has many complaints," adding, "With accounting regulations pending, various difficulties are intensifying."