Samsung Life Insurance, South Korea's largest life company, has said that it will partly compensate about 55,000 clients of its immediate payment annuities despite the financial watchdog advisimg the insurer to guarantee minimum returns for contracts.
It was not immediately clear how much compensation Samsung Life would give to its clients of immediate payment annuities, but local media reports have estimated that the insurer could pay KRW430bn ($384m) if it decides to make full compensation, reports the Yonhap News Agency.
Last year, a client of Samsung Life's immediate payment annuity filed a complaint with the financial watchdog, the Financial Supervisory Service (FSS), claiming that the insurer must guarantee minimum returns of 2.5% per annum. The minimum returns were used to calculate a guaranteed income of the annuity contract, but were not specifically mentioned in the contract, according to FSS officials.
The FSS ruled in favour of the client and advised Samsung Life to compensate the same to all clients of immediate payment annuities.
Under such a plan, a client buys an immediate payment annuity with a single, lump-sum payment and an insurer pays guaranteed income to the client about a month after the contract is signed.
The decision by Samsung Life to make part payment was made at a meeting of the board of directors after the FSS accused the life insurer of deducting part of the payout as a working expense without specifically mentioning it in the contract.
The insurance company said that it will turn to the courts to make a ruling on the issue, indicating that it will launch a legal battle against the FSS.
The company said in a statement, “We will decide whether we will [fully] compensate the clients in accordance with the court’s ruling.”
The case puts other insurers on edge as some of them also did not previously mention service fees they deducted in their contracts.