The Financial Supervisory Service expanded its in-house attorneys and created a separate department to handle the Financial Dispute Mediation Committee (FDMC) to strengthen its dispute mediation function for third-sector insurance, including indemnity plans. Third-sector insurance refers to products that can be offered by both life and non-life insurers, such as indemnity insurance, dementia and long-term care insurance, children's insurance, and dental insurance. Disputes between insurers and consumers over indemnity insurance continue to increase.
According to the financial authorities on the 18th, the Financial Supervisory Service (FSS) set the headcount of the Insurance Product Dispute Department 2 at 31 in personnel moves for positions at Head of Team level and below conducted on the 14th. Compared with the pre-restructuring predecessor, the Dispute Mediation Department 2, the number of in-house attorneys increased by one.
The Insurance Product Dispute Department 2 mediates when disputes arise between insurers and policyholders over claim payments related to third-sector insurance and reflects issues exposed during disputes institutionally at the product design stage. Attorneys in the department propose arbitration plans by referring to past precedents, and if there is no precedent, convene the FDMC. The FDMC is composed of external experts from the medical and legal fields, among others, and if the parties accept the mediation plan, it has the same effect as a court ruling.
The predecessor of the Insurance Product Dispute Department 2, the Dispute Mediation Department 2, handled both dispute mediation advisory work and FDMC convening. Starting with this year's organizational restructuring, the task of convening the FDMC was transferred to the Consumer Rights Protection Bureau. The Consumer Rights Protection Bureau will exclusively handle the convening of the FDMC related to the overall financial sector.
The FSS is strengthening its dispute mediation function for third-sector insurance because related complaints have been increasing recently. According to the Financial Supervisory Service (FSS), disputes over indemnity insurance fell from 8,457 cases in 2022 to 6,954 in 2023 but rose again to 7,264 in 2024. Last year, 5,482 cases were filed through the end of the third quarter.
The FSS sees the increase in disputes as stemming from indemnity insurance policy terms that are broadly defined without clearly specifying certain diseases or diagnostic criteria, leading to large interpretation gaps between consumers and insurers. In Nov. last year, FSS Governor Lee Chan-jin also said, "If insurers unjustifiably refuse to pay claims, we will apply a zero-tolerance principle."
An FSS official said, "With this organizational restructuring and personnel moves, we have broadly strengthened our capacity to respond to disputes over indemnity insurance."