Kyobo to pay benefits for all suicide claims

Kyobo Life Insurance has decided to pay out all suicide claims in the face of punishment from the financial regulator over unpaid benefits.

The decision was made Thursday, hours before the Financial Supervisory Service’s (FSS) committee meeting to decide punishment for three life insurers — Kyobo, Samsung and Hanwha — that resisted the regulator’s order to pay up.

“The company decided to pay the benefits for all suicide cases to regain consumer trust,” a Kyobo official said. According to the official, there are 1,858 cases and the payouts amount to 67.2 billion won ($58.98 million).

But the full amount of Kyobo’s unpaid suicide benefits is 113.4 billion won. Kyobo decided to pay principal and penalty interest for claims reported after September 2007. For claims reported before then, it will pay principal only.

Initially, Kyobo decided to pay some 20 billion won to policyholders who reported their claim after Jan. 24, 2011, when relevant regulations took effect. It then named the payout as “condolence money” but withdrew it after facing criticism that it was a “trick” to avoid the FSS’s punishment. Back then, the company made the decision because CEO Shin Chang-jae could be accused of dereliction of duty if the company paid, which the country’s top court ruled unnecessary.

“It seems that the risk of facing a heavy punishment from the FSS weighed heavier than the issue of dereliction of duty,” a source close to the matter said.

In December, the FSS warned that it would take disciplinary measures against the three insurers for resisting its order. The actions could include suspension of business, cancellation of licenses or recommendations for the dismissal of top officers. The FSS has been forcing insurers to pay regardless of the court ruling, saying it finds insurers liable regardless of the statute of limitations.

The warning was a serious threat for Shin, who is also Kyobo’s largest shareholder with a 33.78 percent stake. Should the FSS slap the firm with a heavy punishment, Shin could lose his grip on the company’s management. His current term ends next month.

Samsung and Hanwha said Kyobo’s decision embarrassed them.

“Samsung Life will not change its current stance,” a company official said. “Since Kyobo made such a decision abruptly, we are not in a position to discuss the issue more and we will just state our current stance to the FSS.”

Samsung and Hanwha decided to pay part of the suicide claims last month.