South Korea's financial watchdog will censure a local insurance company for denying benefits to families of policyholders who commit suicide, which will have a far-reaching impact on the country's life insurance sector, officials said Monday.
According to the officials, ING Life Insurance Co. was found to have denied payouts of accidental benefits worth 20 billion won (US$19.7 million) in some 90 suicide cases, citing erroneous provisions in their contracts with policyholders.
Before 2010, local life insurance companies commonly promised to pay out accidental death benefits, which are far higher than general death benefits, even in cases of suicides.
However, ING Life refused to pay out benefits to policyholders who killed themselves between 2003 and 2010 and instead gave them general death benefits, which the financial watchdog sees as running counter to the terms of the insurer's contract with policyholders.
The FSS will hold a disciplinary meeting next month to finalize the punishment on the insurer and order other life insurance firms to pay arrears for similar suicide cases, officials said.
"Other life insurance companies will be dealt with in accordance with the results of ING Life," said an FSS official. "Complying with the provisions in their contracts is more important than anything else, and that's the point to this case."
Nearly all local insurance firms, including Samsung Life Insurance Co., Kyobo Life Insurance Co. and Hanwha Life Insurance Co., have been refusing to pay out benefits to policyholders in similar cases.
Market watchers estimated that the combined amount of unpaid benefits in suicide cases may reach up to 400 billion won.
According to 2011 data compiled by the Organization for Economic Cooperation and Development (OECD), South Korea's rate of 28.4 suicides per 100,000 people ranked first among its members, followed by Hungary with 19.8 and Japan with 19.7. (Yonhap)