5 Years Since the Enforcement of the Special Act on Insurance Fraud Prevention... Insurance Fraud Has Increased

Continuous Increase in Detected Individuals and Amounts
Involvement of Insurance Workers and Medical Personnel

Weak Punishment Levels and Investigation Limits
Amendment Bill Failed to Pass in the 20th National Assembly

[Asia Economy Reporter Oh Hyung-gil] Insurance broker Jo (41, pseudonym) posted videos such as 'How to Get a Large Settlement for Traffic Accidents' on his YouTube channel to attract interested people. He was later caught after deliberately causing traffic accidents, colluding with oriental medicine doctors to issue false medical certificates, and claiming tens of millions of won in insurance money from insurance companies. Jo, who led the insurance fraud, was sentenced to one year in prison, while the two oriental medicine doctors who issued the certificates received six months in prison with a one-year probation.

There is controversy over the effectiveness of the Special Act on the Prevention of Insurance Fraud, enacted to detect and punish insurance fraud. Although five years have passed since the special law was implemented, insurance fraud has not decreased but rather increased.

Moreover, taking advantage of the COVID-19 pandemic, new types of insurance fraud such as 'rear-end collisions and high daily wages' have emerged, showing a trend toward increasing organization and sophistication. Although public opinion strongly supports supplementing legal limitations and raising punishment levels, related amendment bills were not realized as the 20th National Assembly ended.

According to the Financial Supervisory Service and the insurance industry on the 21st, since the Special Act on the Prevention of Insurance Fraud was implemented in 2016, the number of detected insurance fraud cases and the amount involved have continuously increased. In 2016, the number of detected fraud cases was about 83,000, with an amount of 718.5 billion won, but as of the end of last year, these figures rose to about 92,000 and 880.9 billion won, respectively, marking increases of 10% and 22% over four years.

The number of people knowledgeable about insurance committing fraud is also increasing. Among those caught for insurance fraud last year, 1,600 were insurance sales agents, 1,233 were hospital workers, and 1,071 were auto repair shop employees. Even office workers at insurance-related companies numbered 108. The number of sales agents increased by 28%, and insurance company employees by 56% compared to the previous year.

Recently, the financial authorities issued warnings as cases of insurance fraud targeting people facing economic difficulties due to the COVID-19 situation have increased. Most methods involved recruiting conspirators for insurance fraud by posting fake job advertisements promising high daily wages or encouraging insurance fraud through 'insurance tips' on YouTube or social networking services (SNS) to receive large insurance payouts.

Speaker Moon Hee-sang is presiding over the last plenary session of the 20th National Assembly on the 20th./Photo by Yoon Dong-joo doso7@

Insurance fraud is mostly difficult to detect immediately because suspicion and investigation usually occur only after insurance payments are made following an accident. Although the law stipulates imprisonment of up to 10 years or fines up to 50 million won for detected insurance fraud, many offenders receive only fines, which is considered a factor that lowers deterrence.

The insurance industry has continuously requested amendments to the special law from the National Assembly, but progress is bleak. None of the seven amendment bills submitted during the 20th National Assembly were passed.

The proposed amendments mainly include strengthening penalties for insurance workers (proposed by Assemblyman Kim Jin-tae), establishing the Financial Services Commission's right to request data (proposed by Assemblyman Kim Han-pyo), and setting up dedicated insurance fraud units within insurance companies (proposed by Assemblyman Lee Hak-young).

The amendments also propose aggravated punishment of up to 10 years imprisonment or fines up to 100 million won for insurance industry workers involved in fraud, and allowing information exchange between related agencies such as the National Health Insurance Service and the Korea Workers' Compensation and Welfare Service to share data on illegal administrative hospitals or non-reimbursable items that induce excessive treatment.

They also include establishing dedicated insurance fraud units within insurance companies, enabling insurers to recover fraudulently paid amounts upon a confirmed fraud conviction, and allowing insurance contracts involved in fraud to be canceled from the date of the confirmed fraud judgment.

A representative from the General Insurance Association said, "It is regrettable that the amendment bills to the special law were not passed in this National Assembly despite the widespread insurance fraud," and emphasized, "A social consensus must be reached to expand investigative authority so that insurance fraud can be more actively addressed to protect innocent victims."

This content was produced with the assistance of AI translation services.