<Anchor> 
If you bought fire insurance, wouldn't you be surprised if your insurer canceled your policy after the fire?" 
That's what happened to a small business in Sipi, Korea, when a sudden fire destroyed its main production plant.wownet.co.kr/search/main/main.asp?mseq=419&searchStr=003550" target="_blank">LG, and garnered an impressive 8% global market share, the small company caught fire at the beginning of the year. 

But less than a month after the fire, the company received a surprising notice from its insurer that it had to cancel its fire insurance policy.

<Interview>Park Hee-won,CEO of Lion Chemtech 
"In general, insurance is purchased to prepare for emergencies or to reduce risk...but whenever there is a facility construction for more than a month, it is necessary to notify them, and they canceled the insurance on the pretext that we did not do so. We have already informed our bank of the construction. I don't understand."

The insurer's argument is that they are not responsible for compensating for the fire because the company has already violated the terms of the insurance policy. 
They also said that they have notified the company of the cancellation of the insurance contract, as non-compliance with the terms constitutes a termination of the contract. 

But the company is only frustrated. 
The main transaction bank, KDB Industrial Bank, canceled the existing insurance due to the so-called trickle-down practice of requiring the company to sign up for the bancassurance product it sells in conjunction with the loan, and the company has re-subscribed several times and is currently Lotte Insurance's fire insurance product, he says he was never given a policy, let alone an explanation of the terms and conditions when he signed up. 

The bank that sold the insurance is eager to avoid any future problems with the insurer."

<Voice recording> KDB Industrial Bank official 
"I talked to the insurer (Lotte Insurance) when they came. I knew there were plans to expand (the construction where the fire occurred). I told them. It's difficult to say that the bank sold it. It's a matter of whether the insurance will be paid or not. There was a fire and the insurance will be paid. It has nothing to do with who sold it."

In frustration, he filed a complaint with the financial authorities for help, but it was useless because the insurer quickly filed a lawsuit after notifying him of the cancellation of the insurance contract. 

<Interview> Byeol Han, Attorney at Ahn Byeol Law Firm 
"If there is a significant increase in the risk of an insurance accident during the term of the insurance contract, the insurer is obligated to notify the insured of the change. 
However, in light of the Supreme Court's precedents in similar disputes, we believe that it was excessive for the insurer in this case to file a declaratory judgment action against the customer, seeking confirmation from the court that it had no reason to pay the claim."
 
 

<Standing> 
<Banks, which allow companies to borrow money to grow their businesses, and insurers, which spread their future risks, are really necessary. 
But as long as we continue to have so-called underwriting practices that use their position of power as a lender to push products, and insurers that delay paying claims for all sorts of reasons when a real accident happens, we're going to have a harder time keeping small businesses afloat. 


Korea Economic TV Kim Ki-hyeong.