The headquarters of Kyobo Life in Seoul. Korea Times file
By Lee Kyung-min
A recent verdict against Kyobo Life is unnerving Samsung Life ― amid a similar civil suit with far higher stakes ― given two similar previous court decisions that found life insurers Mirae Asset and Tongyang should compensate subscribers for their underpayment of annuity plans.
This is the latest development in about a dozen suits filed by subscribers in regards to the once-in-demand insurance “product,” the underpaid aggregate total of which amounted to 1 trillion won ($895 million) as of 2018.
The suit against Samsung, one of the top three industry players alongside Hanwha and Kyobo, was filed by 55,000 subscribers seeking 430 billion won, more than six times the 70 billion Kyobo was ordered to pay.
The Seoul Central District Court ruled in favor of a group of four subscribers to a Kyobo product, Thursday, recognizing that the terms and conditions of the products failed to indicate that the amount paid out could be lower than that guaranteed.
Kyobo is expected to appeal, a step taken by Mirae Asset and Tongyang. The hearing for Samsung will be concluded this month and a verdict is expected around August.
The underpayment claim dates back to 2017 when the Financial Supervisory Service (FSS) recommended that sellers of the disputed product compensate 160,000 subscribers, following mediation that involved a complaint filed by a Samsung subscriber.
The subscriber sought the FSS’s opinion after the amount Samsung paid out monthly in an annuity contract declined due to an interest rate fall, saying he was not given the minimum payment, guaranteed in the terms of the product at the time of purchase.
The difference between the amount expected and that paid out was used by insurers to build up their reserves, which insurers failed to clearly inform subscribers of.
The FSS concluded that insurers left the terms unclear over how the minimum payment would be calculated, thereby neglecting the importance of “responsibility” in sales.
But insurers refused to accept the recommendation, leading to the years-long court dispute.
The trial is ongoing for AIA, Heungkuk, DGB, KDB and KB. Shinhan and AIA accepted the FSS recommendation and paid out the full amount to policy holders.