Insurers' claim denials over follow-up tests, clinical trial stays overturned by FSS

The Financial Supervisory Service's Financial Dispute Mediation Committee has ruled that routine checkups and follow-up monitoring conducted solely to track a patient's condition — without any treatment for the underlying illness — do not constitute "additional testing" subject to pre-contract disclosure requirements under simplified-screening insurance policies, also known as policies for people with pre-existing conditions. The ruling is expected to help prevent similar disputes by clarifying the meaning of "additional testing."

The FSS dispute panel said Monday it had issued mediation decisions on July 24 on two disputes involving alleged violations of pre-contract disclosure obligations under simplified-screening insurance policies, which are open to people with chronic conditions such as hypertension and diabetes.

In the first case, involving applicant A, the central question was whether A's blood test constituted "additional testing" subject to pre-contract disclosure requirements under the policy terms, in connection with a specific cancer diagnosis benefit claim.

Under case law, "additional testing" refers to a test conducted after an initial test to reach a more accurate diagnosis based on its results. The FSS has previously stated through press releases and other materials that additional testing means a test carried out because an abnormal finding was identified and a more precise diagnosis was needed.

On that basis, the panel determined that A's blood test was a follow-up observation to track platelet count trends and did not qualify as additional testing under the policy application form, and ordered the insurer to pay the claim.

The panel said it took into account that A had been advised to undergo a general blood test simply to monitor platelet levels after the bone marrow test had returned no abnormal findings, that A had received no treatment or prescription for thrombocytopenia and that platelet counts had remained stable, and that a general blood test — unlike a bone marrow test — could not be considered a detailed diagnostic procedure aimed at directly identifying the underlying cause of low platelet counts.

The same meeting also addressed the interpretation of "hospitalization due to illness" and whether a disclosure obligation had been violated in a separate case.

Applicant E took out a simplified-screening policy in March 2022 and was hospitalized at Hospital F in January and February 2024 for illness G and other conditions, then filed a claim with insurer H for a daily hospitalization benefit covering caregiver use. E had been admitted after experiencing pain from falling while bracing against a wall with the left wrist, and received treatment for complications arising from illness G while using a caregiver.

Before taking out the policy, E had participated in a clinical trial testing the effects of new drug J at Hospital I in December 2019 and April 2021, staying one night on each occasion for a total of four days. The insurer notified E that these stays constituted hospitalization due to illness within the three-year disclosure window and that E had failed to disclose them, and canceled the policy on grounds of a disclosure violation, refusing to pay the claim.

E's attending physician at the time of the clinical trial hospitalizations for new drug J stated that the admissions were not for the treatment of illness G but for the conduct of the clinical trial and related testing.

According to the panel, courts consistently consider the patient's symptoms at the time of admission, the circumstances leading to hospitalization, and the nature of the medical procedures performed when interpreting what constitutes hospitalization due to illness. On that basis, the panel found that hospitalization due to illness should be understood as a stay in hospital where the need for ordinary inpatient treatment or care arising from the symptoms of a disease is recognized.

Because E's condition was manageable through outpatient treatment at the time of admission and the hospitalization appeared to have taken place for the purpose of the clinical trial, the panel ruled that the stays did not constitute hospitalization due to illness and ordered the insurer to pay the claim.

The panel noted that the admission records listed the purpose of hospitalization as participation in a clinical trial and that a medical certificate had been issued stating the admission was not for treatment purposes, that E's condition at the time had been manageable through outpatient care with existing medication, and that all participants in the clinical trial had received the same drug administration and blood draws in accordance with the trial protocol, making it difficult to regard the procedures as individualized medical treatment.

A mediation decision takes effect if both parties accept the proposed settlement within 20 days of receiving it.

As interest in simplified-screening insurance — which applies looser underwriting standards — continues to grow, the market surpassed 13 trillion won ($8.87 billion) in the first half of this year, already accounting for about three-quarters of last year's full-year earnings. The market is expected to exceed 20 trillion won for the full year.

"We plan to encourage insurers to establish prompt and reasonable claims-payment practices for simplified-screening insurance," an FSS official said, adding that the agency would "continue to convene the dispute mediation committee actively and work to protect financial consumers."