Mandatory Notification and Disclosure of Insurance Claim Review Standard Changes... Fewer Denials and Disputes Expected

FSS to Implement Administrative Guidance on June 22
Disclosure Required for Changes in Insurance Claim Payment Standards
Basis, Details, Effective Date, and Contact Information Must Be Provided

Going forward, insurance companies will be required to provide advance notice to consumers and establish standardized review procedures whenever insurance claim review criteria are changed as a result of decisions by the Supreme Court or by financial and health authorities. This measure is expected to reduce information asymmetry between consumers and insurers, as well as decrease moral hazard—such as certain brokers or medical institutions recommending expensive procedures to consumers who are unaware of the changes in claim review criteria.

On June 21, the Financial Supervisory Service announced that it will implement administrative guidance containing obligations to disclose changes in insurance claim review criteria starting the following day. This is part of the 'Financial Consumer Protection Improvement Roadmap' initiative.

Previously, insurance companies were not obligated to provide advance notice to consumers about changes in insurance claim review criteria, even when those changes were prompted by Supreme Court rulings, decisions of the Financial Supervisory Service's Dispute Mediation Committee, or authoritative interpretations and administrative guidance from financial and health authorities. As a result, consumers often only learned of the insurance claim review criteria changes after being denied insurance payments following medical treatment, having trusted the existing payment practices.

First, insurance companies must provide advance notice to consumers in the event of significant changes to review criteria. Notification must be made through at least two channels, such as messaging apps or application push notifications, as well as disclosed on the company’s website. The notification and disclosure must include the basis and purpose for the “significant review criteria change,” details of the change, the date of implementation, and contact information. Furthermore, insurers can only apply the revised review criteria at least three business days after notifying consumers.

Insurance companies will also be required to strengthen their internal controls. Going forward, whenever insurance claim review criteria are changed, standardized review procedures must be established according to mandatory requirements. These requirements include: ▲ mandatory participation of executives responsible for claim review, consumer protection, and legal affairs; ▲ final approval by executives and oversight by compliance officers; ▲ prior review by departments in charge of consumer protection, legal affairs, and claim review before an agenda item is submitted. Accordingly, insurers must notify consumers of changes that may be unfavorable to them following these standardized procedures.

Additionally, significant changes to review criteria that require consumer notification must be approved by the relevant executive. In the past, each insurance company had its own decision-makers and procedures for such changes. Moving forward, the process will require: ▲ prior review of agenda items by consumer protection, legal, and review departments; ▲ review by a committee including executives responsible for consumer protection and legal affairs; ▲ executive approval and agreement by compliance officers; ▲ disclosure on the company website and individual notification to consumers.

As a result, consumers will become aware of changes to insurance claim payment criteria before undergoing medical procedures, by seeing the public disclosure of the review criteria changes, rather than only after payment has been denied following treatment, as was previously the case.

A representative from the Financial Supervisory Service stated, "After the implementation of this administrative guidance, consumers will be able to make more informed medical and insurance decisions, which is expected to reduce insurance claim disputes. The objectivity and transparency of insurers’ claim reviews will improve, and the practice of certain brokers or medical institutions recommending expensive procedures will be prevented—ultimately reducing consumers’ unnecessary medical expenses."

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