Insurers mull lawsuit against policy payments for suicides

SEOUL, Sept. 23 (Yonhap) -- South Korea's financial watchdog has ramped up pressure on local life insurers to pay contracted money to the families of policyholders who commit suicide, but insurance companies are weighing taking the case to court, industry sources said Tuesday.

More than 10 life insurers were ordered by the Financial Supervisory Service (FSS) to pay the insurance money in arrears by the end of the month, according to the sources.

The insurers had sold policies for accidents that cover disaster-caused deaths as well as suicides between 2003 and 2010 before it changed the terms of the policies to exclude suicide.

Under the previous contract terms, the families of policyholders who committed suicide would receive far higher accidental death benefits than payments from general death.

But insurers denied payouts of accidental death benefits, arguing that the suicide provision was inserted in the contract in error and that payments for suicide would encourage people to kill themselves.

In June, the FSS penalized a life insurer for not complying with the provision in its contracts with policyholders and "recommended" that others pay out similar suicide insurance money.

"If we follow the watchdog's recommendation, we will face a flood of benefit claims from suicides. And some insurers may face a management crisis on suicide payments," said an official at a local insurer. The official said the insurers may decide this week on whether to file a lawsuit against the FSS's decision.

Market watchers estimated that the combined amount of unpaid policies for suicide cases would go over 200 billion won (US$192 million).

According to 2011 data compiled by the Organization for Economic Cooperation and Development (OECD), South Korea's suicide rate was 28.4 per 100,000 people, ranking the country at the top among its members, followed by Hungary with 19.8 and Japan with 19.7.

sam@yna.co.kr
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