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Amendment of the Standards on Outsourcing of Loss Adjustment Work for Fair and Reasonable Insurance Proceeds Calculation and Payment


The financial authorities will amend the Standards on Outsourcing of Loss Adjustment Work to improve fairness and reasonableness of loss adjustment practice and protect consumers.  The details are as follows:
A.   Preparation of Principles for Evaluation and Outsourcing of Loss Adjustment Business


  • When insurance companies (i) evaluate loss adjusters, they are prohibited from reflecting standards that are disadvantageous for consumers, such as reduction of insurance proceeds and records of non-payment of insurance proceeds, and (ii) arbitrarily or discriminately applying criteria for evaluation of loss adjusters without a reasonable ground.

  • Insurance companies are prohibited from (i) requesting loss adjusters to lower the bid prices in their bids, (ii) unfairly terminating contracts for reasons other than those that are set forth in the contracts, and (iii) predetermining the loss adjustment result or not paying or delaying payment of commissions to loss adjusters without a reasonable ground.

B.   Rationalization of Evaluation Criteria for Loss Adjusters

  • The new standards prepare the standard evaluation criteria to appropriately evaluate loss adjusters based on their comprehensive capabilities (satisfactory service, insurance fraud prevention, etc.) including their work and management performance.

C.   Enhancement of the Obligation to Disclose Outsourcing of Loss Adjustment Work

  • The new standards require insurance companies to report and disclose their loss adjuster selection and evaluation principles, etc. to their boards of directors if the ratio of loss adjustment outsourcing to their subsidiaries is 50% or more.

The above improvements will be enforced starting from July 2023 through the Insurance Association’s amendment of the relevant standards and insurance companies’ application of the amendments to their internal regulations during the first half of 2023.


[Korean Version]