5 Years Since the Enforcement of the Special Act on Insurance Fraud... Strengthening Punishment for Insurance Fraud Wasted Time (Comprehensive)

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 staging traffic accidents intentionally, colluding with oriental medicine doctors to issue false medical certificates, and claiming tens of millions of won in insurance payouts. 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 law's implementation, 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 increasing punishment severity, related amendment bills failed to be 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 enacted in 2016, the number of detected insurance fraud cases and the amount involved have steadily 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 rising. 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. Additionally, 108 office workers employed by insurance-related companies were involved. The number of sales agents increased by 28% compared to the previous year, and insurance company employees rose by 56%.

Recently, cases of insurance fraud targeting people facing economic difficulties due to the COVID-19 crisis have increased, prompting financial authorities to issue warnings. Common tactics included recruiting conspirators for insurance fraud by posting fake job advertisements offering high daily wages or promoting "insurance tips" on YouTube and social networking services (SNS) to encourage fraud for higher insurance payouts.

Insurance fraud is mostly detected only after insurance payouts are made following an accident, making immediate detection difficult. Although the law stipulates penalties of up to 10 years imprisonment or fines up to 50 million won for insurance fraud, many offenders receive only fines, which is considered a factor that diminishes deterrence.

The insurance industry has continuously requested amendments to the Special Act in the National Assembly, but progress remains bleak. None of the seven amendment bills proposed during the 20th National Assembly were passed.

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

The amendments also propose harsher penalties for insurance industry workers involved in fraud, with imprisonment up to 10 years or fines up to 100 million won, and allowing information exchange between related institutions such as the National Health Insurance Service and the Korea Workers' Compensation and Welfare Service to share data on illegal administrative hospitals or excessive non-reimbursable treatments.

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 cancellation of insurance contracts from the date of confirmed fraud judgment.

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

[Image source=Yonhap News]

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