Insurance Law and Regulation
Scope
Insurance law and regulation tests the Insurance Business Act (보험업법), the Commercial Act (상법) insurance contract rules, and supervisory practice. Expect questions on disclosure, notification, insurable interest, subrogation, unfair sales practices, and licensing.
Core rules
- Indemnity insurance requires insurable interest; life insurance requires the insured’s consent under Commercial Act Article 731.
- Duty of disclosure: the policyholder must disclose material facts. Under Commercial Act Article 651, the insurer may cancel within one month of knowing the breach and within three years of contracting, for intentional or grossly negligent breach.
- Duty to notify material risk increases after inception; breach can allow cancellation or adjusted premium.
- Subrogation lets the insurer step into the insured’s claim against a third party after paying indemnity.
- The Insurance Business Act regulates licensing, capital, product filing, solicitation, fees, and unfair business practices.
- Policy terms must be clear; ambiguous standard terms are construed against the insurer.
Worked example
An applicant deliberately fails to disclose a prior cancer diagnosis. The insurer issues a life policy; two years later it discovers the omission. Can it cancel?
The breach is intentional and material. Under Article 651, the insurer can cancel within one month after learning of the fact and within three years after the contract date. Because it learned recently and the contract is still under three years old, cancellation is available. Reasoning: both time limits must be satisfied; the one-month period protects the insurer from delay after knowledge, while the three-year period limits prolonged uncertainty. Intentional breach also affects whether the insurer must return premiums and whether a claim is payable.
Traps
Mixing the one-month and three-year periods is a frequent error. Ordinary negligence does not permit cancellation under Article 651, although it may affect other remedies. Do not confuse subrogation with contribution between insurers. Sales-conduct rules under the Insurance Business Act are separate from contract-law validity.