Immediate Annuity Refund... Self-Payment Reimbursement... Consumer Class Action Wins Consecutive Victories (Comprehensive)

[Asia Economy Reporter Oh Hyung-gil] Insurance companies are becoming increasingly tense as they continue to lose in class-action lawsuits filed by consumers. Life insurers and non-life insurers are closely monitoring the results of ongoing lawsuits regarding the return of unpaid immediate annuity funds and refunds of automobile insurance deductibles, as these outcomes could significantly impact other related disputes.

According to the insurance industry on the 14th, the first trial verdict for a lawsuit filed by 57 policyholders, including Mr. Kang, against Samsung Life Insurance seeking the return of approximately 521.5 million KRW in immediate annuity insurance payments is expected on the 21st.

원본보기 아이콘

The reason this lawsuit, which began in October 2018 and has dragged on for over three years, is attracting attention is that Samsung Life has the largest amount of unpaid funds. According to the Financial Supervisory Service's 2018 assessment, the total unpaid immediate annuity funds amounted to 1 trillion KRW, with Samsung Life accounting for 430 billion KRW, Hanwha Life 85 billion KRW, and Kyobo Life 70 billion KRW.

Another reason is that insurers have been losing consecutively in similar lawsuits. In the class-action lawsuit for the return of unpaid immediate annuity funds led by the Korea Financial Consumer Federation, Mirae Asset Life, Tongyang Life, and Kyobo Life all lost in the first trial. Although they appealed the rulings, the industry atmosphere suggests that if Samsung Life, the market leader, also loses, it will have a significant ripple effect not only on other ongoing lawsuits but also on the appeals process.

Immediate annuities are products where a lump sum is paid as a premium, and a portion of the investment returns is paid monthly as an annuity. Upon the policyholder’s death or maturity, the principal of the paid premiums is returned. Complaints arose claiming that the annuity amount did not meet the minimum guaranteed interest rate. The dispute centers on insurers deducting funds for maturity payments and calculating monthly annuity amounts without properly explaining these details.

원본보기 아이콘

Consumers also won in the automobile insurance deductible refund lawsuit. The Seoul Central District Court ruled in favor of the plaintiffs, who filed a lawsuit against the National Federation of Private Taxi Transport Associations seeking compensation for unpaid automobile insurance deductibles.

In November 2020, the Korea Financial Consumer Federation filed a class-action lawsuit with about 100 consumers against 10 non-life insurers, rental car associations, and bus and taxi mutual aid associations, demanding the return of unpaid deductibles. The total claim amount was 33 million KRW, averaging about 300,000 KRW per victim. The class-action lawsuit is supported by the Fair Trade Commission’s consumer rights enhancement project, which fully covers the litigation costs for participating consumers.

The deductible system requires policyholders to pay a portion of their own vehicle repair costs, ranging from 200,000 to 500,000 KRW, before fault determination in vehicle-to-vehicle accidents. However, controversy arose because insurers did not refund the deductible to the policyholders even after recovering subrogation payments from the opposing insurer based on fault determination results.

Financial authorities and non-life insurers argue that deductibles are intended to prevent moral hazard caused by excessive repairs and therefore cannot be refunded. Although a class-action lawsuit against non-life insurers has not yet been filed, this recent ruling has emerged as a significant variable.

An industry official from the non-life insurance sector said, "Although the consumer won the deductible lawsuit, judgments on individual cases may differ. The industry atmosphere is that legal rulings are necessary to resolve the controversy."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.