FSC and FSS Held Second Insurance Reform Conference

On August 8, 2024, the Financial Services Commission (the “FSC”) and the Financial Supervisory Service (the “FSS”) held the second “Insurance Reform Conference for Restoration of Trust and Innovation” (the “Insurance Reform Conference”). This event was attended by representatives from academic circles, including the Korean Academy of Financial Consumers, various related organizations, research institutes, insurance companies and insurance associations.

The need for reform was raised after the kick-off meeting in May 2024, where the issues concerning trust and innovation in the insurance sector were brought to light by both industry stakeholders and consumer advocates. In response, the Insurance Reform Conference formed and has operated five working groups: (i) the New Accounting System Team, (ii) the Product Structure Team, (iii) the Sales Channel Team, (iv) the Sales Practice Team, and (v) the Future Preparation Team. These groups identified the top ten strategies and over sixty tasks based on their study of insurance business issues, discussions within the working groups and interviews with C-level executives from insurance companies (30 companies). During the first meeting, the Insurance Reform Conference agreed to prioritize issues that directly impact citizens’ daily lives in a way that is noticeable to consumers. Accordingly, the second meeting revealed measures to improve confidence in the insurance industry and enhance insurance products in a visible manner.

Here are some highlights from the second meeting of the Insurance Reform Conference.

1.	How to Improve Confidence in Insurance Industry

Prevention of Unfair Refusal to Pay Insurance Proceeds

The Insurance Reform Conference announced that it would reorganize systems and enhance the process for filing claims, ensuring consumers receive insurance proceeds fairly and promptly upon the occurrence of an insured event.

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Improvement of Medical Advice Practices

To prevent the medical advice system from being misused to deny claims, medical advice will be provided only by institutions superior to the medical institution where the treatment and diagnosis were made, and separate pools of neutral specialists will be established. In addition, transparency will be ensured by breaking down disclosures by the reasons for medical advice.

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Improvement of Claims Assessment System to Strengthen Consumer Rights

The Insurance Reform Conference aims to strengthen the system of independent claims adjusters by (i) expanding the scope of products eligible for independent claims adjustment from indemnity insurance claims to all insurance products needing claims adjustment, (ii) extending the term of appointment from three business days to ten business days, and (iii) requiring insurers to notify consumers in advance about the criteria for the appointment of independent claims adjusters and consent to the appointment.

Establishment of Consumer-Friendly System at Each Stage of Insurance Contracts

The Insurance Reform Conference announced plans to strengthen consumer protection throughout all stages of insurance contracts, including product development, insurance sales, product explanation and execution.

–	Product Development Stage: Improving the Standard Terms and Conditions Review System To prevent insurers from developing inappropriate products, the Insurance Reform Conference plans to revise the FSS’ review system for standard terms and conditions by compiling and computerizing the review results of products reported and accepted over the past ten years to ensure that all insurers have access to these results.
–	Insurance Sales Stage: Preventing General Agencies^[1] (“GAs” or “GA”) from Excessively Competing for Agent Scouts To address the issue of overpayment of the settlement support fund to insurance agents of GAs, the Insurance Reform Conference plans to establish the “Best Practice Guidelines for Settlement Support Fund Operation” to set standards for calculating and retrieving the settlement support fund for each GA, and to require each GA to disclose the settlement support fund information quarterly. In addition, the GA’s headquarters will manage the status of the settlement support fund operation in an integrated manner to strengthen internal control.
–	Product Explanation Stage: Strengthening Information Provision to Consumers About Agents The Insurance Reform Conference plans to require agents to provide consumers with key information, such as their insurance solicitations experience, sanctions history and policy retention rate, in a separate written form in advance.
–	Execution of Insurance Contract Stage: Improving the Effectiveness of the Happy Call System to Prevent Mis-selling The Insurance Reform Conference plans to enhance Happy Call scripts, reducing call duration and simplifying terminology to align with consumer expectations. Happy Calls will be conducted for life insurance policies where the policyholder and the insured differ, and a separate channel will be created for Happy Call refusers to inform them of essential insurance contract details.

Efficient Handling of Insurance Complaints

The Insurance Reform Conference announced that simple inquiries, complaints handled by insurance companies in the past and complaints irrelevant to policyholders will be referred to the insurance associations. This will allow the FSS to concentrate on resolving disputes or complaints, while a complaint handling committee will be formed to ensure fairness in the resolution of complaints by insurance associations.

How to Improve Insurance Products in a Way That People Can Notice

The Insurance Reform Conference unveiled plans to (i) extend insurance coverage to pregnancy and childbirth, (ii) allow accident-free reimbursement of non-life insurance to the extent of special benefits under the Insurance Business Act, and (iii) permit simplified insurance agencies to sell life and Type 3 insurance products in accordance with their business policies.

The Insurance Reform Conference will meet monthly until the end of the year. Actions that can be implemented without amending laws and regulations will be implemented immediately, and amendments to laws and regulations will be made as necessary for ongoing system improvements. Furthermore, the Insurance Reform Conference plans to prepare comprehensive improvement measures by the end of the year and announce them in the first quarter of 2025 after engaging in a policy debate.

The Insurance Reform Conference is expected to expedite the amendment of laws and the development of products discussed during the second meeting, focusing on enhancing the credibility of IFRS17, improving indemnity insurance and strengthening general GA accountability at subsequent meetings in 2024.

^[1] General Agencies: Corporate insurance agencies

[Korean Version]

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