On October 16, 2025, the Korean Supreme Court rendered its decision in the so-called “immediate annuity insurance” litigation, ruling in favor of the insurer defendants, and affirming the lower court’s dismissal of the claims filed by the policyholders. Under an immediate annuity insurance policy, the policyholder makes a single, upfront payment of the premiums at the start of the contract, and, thereafter, receives monthly annuities, and a maturity benefit upon maturity. Since 2018, numerous lawsuits had been filed concerning “maturity-type” immediate annuity products, that both pay monthly annuities and return the paid premiums as a maturity benefit. If the policyholders’ claims had prevailed, it is estimated that insurers would have faced an additional liability of approximately KRW 1 trillion.
As the policies required insurers to pay maturity benefits equal to the full amount of premiums paid without deducting business expenses incurred upon sale of the immediate annuity products, the products were structured so that a certain amount would be deducted from the monthly annuities, as expressly stipulated in the premium and reserve calculation statements filed with financial authority (which included the calculation formula). Policyholders, however, claimed that as this feature was not explicitly stated in the policy terms, it could not be deemed as part of the contractual agreement.
The policyholders contended that proper interpretation of the policy terms would require the monthly annuity amount to be calculated as the declared interest rate multiplied by the net premium without any deduction, and claimed such amounts. Alternatively, they argued that even if the policy terms should be interpreted otherwise, the claimed amounts would be owed, as the insurers breached their “duty to explain.” While some lower courts had initially rendered conflicting decisions, in November 2022, the Seoul High Court ruled in favor of the insurers, and subsequent court decisions had been consistent with such High Court’s decision.
In its decision, the Supreme Court noted that the policy terms could not be interpreted as claimed by the policyholders. As for the insurers’ “duty to explain,” the Supreme Court noted that while it was difficult to view that insurers had fully discharged their duty to disclose and explain the key factors in the calculation of the annuity payments, in light of the applicable principles in interpreting insurance contracts and the facts of this case, the Supreme Court found that the annuities should be calculated in accordance with the formula set under the calculation statement.
In arriving at its decision, the Supreme Court took into consideration the purpose, structure, and market sales practices relating to maturity-type immediate annuity products, the reasonable level of returns that the average policyholder would have expected in considering the policy terms, the collective interests of all policyholders, and the fact that the subscription documents included illustrative projected annuity amounts by product type. In light of such factors, the Court ruled that the objective, proper interpretation of the policy terms lead to the conclusion that the calculation of benefits would be as described in the calculation statement, and that it would be difficult to view such interpretation as unfairly disadvantageous to policyholders. Meanwhile, the Supreme Court also noted that given the importance of monthly annuity amount to policyholders, insurers should have expressly disclosed in the policy terms and explained the general calculation deducting certain amount from the monthly annuities. The Supreme Court further noted that merely referencing the calculation statement or simply indicating illustrative annuity payment amounts in the subscription documents was insufficient. Thus, going forward, insurers would need to ensure that calculation methodologies are clearly disclosed in the basic policy documents and explained to policyholders.
Kim & Chang represented the majority of the defendant insurers in this case, which lasted approximately seven years. Our firm presented effective and persuasive arguments which ultimately showed that as policyholders had selected these products after comparing sample annuity amounts provided by the insurers for each product type, they did not suffer any unfair disadvantage. The Supreme Court ultimately agreed with such arguments and upheld the validity of the annuity payments made by the insurers under the existing policies.
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