Consumer complaints over indemnity insurers soar

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Insurers apply stricter evaluations to overcome chronic deficits from indemnity plans

By Anna J. Park

The number of consumer complaints against insurance companies has been soaring lately, as local insurers have been strengthening evaluation processes to minimize paying out on claims. The rising conflicts between insurers and insurees don't look to have any end in sight, as the former aim to eradicate their chronic deficits from indemnity insurance products.

According to the local non-life insurance industry, the number of complaints filed during the first quarter of this year stood at 10,727, up 15.6 percent from the same period last year. The number of complaints on claim settlements rose by 34.5 percent year-on-year.

Among the various types of consumer complaints, the leading category turned out to be complaints about insurers' handling of medical indemnity insurance plans, under which insurance companies usually compensate an insured party for their medical costs.

Recent data by the Financial Supervisory Service (FSS) showed the number of complaints filed during the first quarter of this year has skyrocketed by 84.9 percent, compared to the same period last year.

The reason behind the sudden surge of complaints about indemnity insurance plans lies in insurers' stricter approach when it comes to evaluating claims.

Local insurers say that they are bearing the deficit from medical indemnity insurance which is growing every year. The total annual deficit from indemnity insurance plans of local insurers posted 2.86 trillion won ($2.17 billion) as of the end of last year, which is a whopping 133 percent increase from 2017.

Local insurers say they cannot help but strengthen evaluations on coverage claims to identify acts of insurance fraud in order to prevent higher premiums being passed on to other insurees who act in good faith.

The surge of coverage claims for cataract surgery is one such example of dubious insurance manipulations on the part of some insured hospitals and patients. Local non-life insurance companies compensated a total 457 billion won for cataract surgeries during the first quarter, which is a record-high quarterly pay-out for the eye condition. The peculiarity is clear, when considering the proportion of the compensation for cataract surgeries out of the entire coverage soared to 17.4 percent in March this year, compared to 9 percent in the previous year.

Because of insurers' stricter evaluations of coverage claims, the number of dispute settlement conciliations filed to local non-life insurers also jumped to 7,850 in the first quarter of this year, which is a 25 percent year-on-year increase. The number of actual legal cases filed during the dispute settlement period also rose by 50 percent year-on-year.

Meanwhile, the association of local insurance companies decided to extend their special three-month surveillance program, jointly run with the police agency and financial authority, until the end of the year. Under the program, insurance companies offer rewards to those who report cases of insurance fraud.