Fetal Insurance Terminated Over Undisclosed C-section... Financial Supervisory Service Urges Insurers to "Protect Consumers"

Meeting of Insurance Department Heads
Call for Stronger Internal Controls on Caregiver Insurance
Presentation of Extracorporeal Shock Wave Dispute Cases
Financial Supervisory Service: "On-site Inspections if Needed"

On September 14, the Financial Supervisory Service shared examples of disputes related to fetal insurance and caregiver insurance provided by insurance companies, and instructed insurers to strengthen proactive consumer protection measures at the insurance claims payment stage.

On this day, the Financial Supervisory Service held an expanded meeting of consumer protection and compensation department heads in the insurance industry, providing guidance on recent increases in dispute cases and outlining its supervisory direction. The meeting expanded attendance from the previously held “consumer protection department heads’ meeting” to also include compensation departments.

Regarding fetal insurance, the agency noted cases where insurers terminated contracts on the grounds that pregnant women had failed to disclose pre-existing conditions not directly related to the fetus before signing the agreement. The Financial Supervisory Service urged insurers to avoid imposing excessive disadvantages on consumers in such cases. Fetal insurance is a product designed primarily to cover risks associated with a child yet to be born, and requires pregnant applicants to disclose certain information prior to signing the contract. After the child is born, the policy is converted to children’s insurance, but disputes have arisen when companies use pre-contract disclosure obligations as grounds to terminate contracts.

According to the Financial Supervisory Service, one insurance company terminated the entire fetal insurance contract for a second child because the pregnant woman had not reported an emergency C-section during her first delivery. The Financial Supervisory Service mediated the dispute and resolved that the policy for the child should be maintained.

On the issue of caregiver insurance, the agency pointed out a recent increase in fraudulent claims—such as family members filing false claims for caregiving services—and warned insurers not to demand excessive proof in ways that could harm honest policyholders. The Financial Supervisory Service stressed that insurance companies should thoroughly assess the risk of insurance claims leakage caused by third parties, such as caregivers and medical institutions, from the early stages of insurance product design. For example, it mentioned the need to operate an internal consultative body that incorporates the opinions of consumer protection and claims review departments during product development.

The agency also addressed problems at some insurance companies where excessive medical consultations delayed claims payments. It presented major work cases related to the new dispute resolution criteria for extracorporeal shock wave therapy established in June, asking insurers to prevent consumer harm.

The Financial Supervisory Service announced plans to actively respond to side effects caused by managed care benefit designation for manual therapy and to insurance fraud. It also plans to cooperate on investigations into so-called “rehabilitation hospital payback” schemes. The agency requested swift handling of complaints and disputes from insurers, and said it would facilitate regular sharing of dispute resolution cases through the “Key Man” system, in which a designated dispute manager is assigned at each insurer.

A Financial Supervisory Service official said, “We will closely monitor dispute trends by company and type, check for unusual signs, and if necessary, conduct on-site inspections.”

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