Controversy is rising as insurance companies arbitrarily reduce premiums for premium hospital room rates for subscribers with multiple first-generation actual loss insurance policies.
The Korea Consumer Agency’s Consumer Dispute Mediation Committee announced on the 27th that it ruled in favor of A, a woman in her 50s, in a dispute mediation case filed against Non-Life Insurance Company B.
According to the Consumer Agency, Mr. A subscribed to 1st generation actual loss insurance from non-life insurance company B and 4th generation actual loss insurance from non-life insurance company C. The 1st generation actual loss insurance was signed up before September 2009 and does not have standard terms and conditions, and the 4th generation actual loss insurance was signed up after July 2021.
What is noteworthy is the timing of insurance subscription. Actual loss insurance, which has been sold since October 2009, introduced a proportional compensation method in which insurance companies apply a proportional share for each contract when paying insurance benefits to duplicate subscribers.
Mr. A, who was hospitalized for cancer for 43 days from March 16 last year, filed a claim with his insurance company for actual loss of 7.08 million won for the use of a single- and double-bed room. According to the terms and conditions, non-life insurance company B must pay 2.58 million won, which is 50% of the hospital room fee for a double room (KRW 120,000), and non-life insurance company C must pay 3.54 million won, which is 50% of the non-covered hospital room fee according to the terms and conditions.
However, non-life insurance company B claimed that it would only pay 1.49 million won, saying, “Proportional compensation should be made based on 3.54 million won, which is the larger amount of compensation liability of each insurance company.” The proportional compensation method was applied.
The committee emphasized, “If non-life insurance company B claims, it is an unreasonable situation where Mr. A receives less insurance money even though he subscribed to two products.” He continued, “The insurance terms and conditions of non-life insurance company B do not clearly specify the proportional compensation method for first-generation actual loss insurance, so there is a conflict of interpretation with the terms and conditions of actual loss insurance for the second or higher generations. In this case, it must be interpreted in a way that is favorable to the consumer in accordance with the Terms and Conditions Act.” “He pointed out.
Accordingly, the committee decided, “As the total compensation liability of the two insurance companies does not exceed the actual treatment cost (hospital room fee), Insurance B must pay the full amount calculated (2.58 million won) without proportional compensation.”
However, B Non-life Insurance Company did not accept the committee’s decision. The Dispute Mediation Committee’s decision is not compulsory, so if Mr. A wants to receive more insurance money, he must ask for help from another agency, such as the Financial Supervisory Service, or file a lawsuit.
Previously, in August 2015, the Financial Supervisory Service recommended that insurance companies return unpaid deductibles to consumers, saying that the 10% deductible deductible in actual loss insurance terms and conditions was unclear, which all insurance companies accepted. The committee pointed out that this issue, like the deductible, is a problem because insurance companies are arbitrarily applying proportional compensation to the premium for the difference in premium hospital room rates without a clear basis in the terms and conditions.
The committee announced that since the insurance company did not accept the decision, it decided to request supervision from the financial authorities. An official from the Consumer Agency said, “We plan to request management and supervision from the financial authorities for identical or similar cases to prevent additional damage to consumers who have duplicate subscriptions to first-generation actual loss insurance.”
Among the 39.97 million actual loss insurance subscribers, first generation subscribers account for 19.1%. The number of applications for damage relief from the Consumer Agency related to actual loss insurance was 301 in 2022 and 364 last year.
**What are the potential ramifications for the Korean insurance market if the Korea Consumer Agency’s ruling in favor of Ms. A sets a precedent for insurance disputes related to proportional compensation?**
## Interview: Controversy over Arbitrary Reduction of Hospital Room Premiums
**Welcome to World Today News. Today, we’re diving deep into a concerning trend impacting insurance policyholders in Korea. With us today are two experts: [Guest 1 Name], a legal expert specializing in insurance law, and [Guest 2 Name], a consumer rights advocate with extensive knowledge of the Korean insurance market.**
**Section 1: Understanding the Issue**
**Host:** Thank you both for joining us. To start, could you each provide your understanding of the core issue highlighted in the recent Korea Consumer Agency decision? What are the main points of contention between insurance companies and policyholders with multiple first-generation actual loss insurance policies?
**Guest 1:**
**Guest 2:**
**Host:** This case revolves around the concept of “proportional compensation” for duplicate subscribers. Guest 1, can you elaborate on how this principle is meant to function and where the potential for conflict arises?
**Guest 1:**
**Host:** Guest 2, from a consumer perspective, what are the biggest concerns surrounding this arbitrary application of proportional compensation? How might this affect individuals who have relied on multiple policies for financial protection?
**Guest 2:**
**Section 2: Legal Interpretation and Consumer Protection**
**Host:** The Korea Consumer Agency ruled in favor of the policyholder, Ms. A, stating that the proportional compensation should not apply in her case. Guest 1, what legal arguments were crucial in reaching this decision?
**Guest 1:**
**Host:** Guest 2, how significant is this decision from the Consumer Agency? Does it set a precedent for similar cases, and what are the implications for the broader insurance market?
**Guest 2:**
**Host:** The article mentions that the decision isn’t binding, and the insurance company hasn’t complied. Guest 1, what options are available to Ms. A and other policyholders facing similar situations?
**Guest 1:**
**Section 3: Looking Ahead: Solutions and Systemic Changes**
**Host:** This case highlights a potential gap between insurance policies and consumer expectations. What systemic changes could be implemented to prevent these types of disputes in the future?
**Guest 2:**
**Host:** Guest 1, from a legal standpoint, are there any regulations or amendments to existing laws that could address this issue more effectively?
**Guest 1:**
**Host:** Thank you both for your insightful perspectives. This is an evolving situation with significant implications for policyholders across Korea. We encourage viewers to stay informed and seek clarification from their insurers regarding their coverage.
**(Closing remarks)**
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