Insurers will be required to notify consumers within three days when they reduce insurance payouts based on Supreme Court rulings or administrative guidance from financial and health authorities.
According to financial industry sources on Wednesday, the Financial Supervisory Service (FSS) recently announced administrative guidance outlining a new "Guideline for Changes to Insurance Claims Assessment Criteria."
Under the new guidance, insurers must notify consumers within three business days when they change payout criteria based on Supreme Court rulings, FSS Dispute Resolution Committee decisions, or official interpretations and administrative guidance from financial or health authorities. Insurers must not only post the revised payout criteria on their websites but also notify each consumer through channels such as KakaoTalk alerts, app push notifications, and text messages.
A notable feature is that insurers may also be required to notify consumers when they change claims assessment criteria based on "medical guidelines generally recognized in the medical community." This means insurers should be able to inform consumers in advance even when they independently change payout criteria before Supreme Court rulings or Dispute Resolution Committee decisions are issued.
Additionally, insurers are now required to obtain prior review and approval from executives in charge of consumer protection and legal affairs before changing assessment criteria. For example, consumer protection executives must analyze the expected scale of complaints and disputes resulting from the criteria change and assess the impact on consumers. Legal affairs executives must also review relevant precedents and compliance with internal regulations.
The FSS established these guidelines for insurance claims assessment criteria to prevent so-called "hidden benefits reductions." There have long been concerns inside and outside the financial industry that consumers found it difficult to know in advance when insurers reduced payouts by changing their criteria. This has led to significant conflicts between insurers and consumers regarding indemnity insurance payouts for procedures such as cataract surgery and knee injections. FSS Governor Lee Chan-jin reportedly emphasized at the first meeting of the "Financial Consumer Protection Advisory Committee" he chaired last month that consumer notification should be strengthened when claims assessment criteria are changed.
Financial industry observers also note that the new guidelines could help prevent overtreatment by hospitals. If consumers are informed in advance by insurers about reduced coverage, they would be much less likely to accept recommendations for unnecessary treatments from hospitals. "One purpose of these guidelines is also to target hospitals with serious moral hazard issues," a financial industry official noted.