[In-Depth Review] Suggestions for Eradicating Insurance Fraud

Despite the introduction of the Special Act on the Prevention of Insurance Fraud (hereinafter referred to as the ‘Act’) in 2016 to eradicate insurance fraud, such fraud continues to increase. Compared to the time of the Act’s implementation, the amount detected (889.8 billion KRW) has increased by 25%, and the number of people caught (100,000) has risen by more than 19%, raising doubts about the effectiveness of the Act. This article examines the causes of the increase in insurance fraud and possible countermeasures.

First, insurance fraud is not easy to detect. Proving intent is particularly difficult; even if multiple accidents have occurred, scientific evidence such as black box footage and thorough analysis are required to prove that these were intentional. As a result, even when investigations are requested, less than 20% of cases lead to punishment.

Even when insurance fraud is detected, light penalties pose another problem. The mild punishments contribute to the ease with which ordinary people succumb to the temptation of committing insurance fraud. If the structure is ‘low risk, high return,’ the likelihood of crime occurrence will increase.

Misconceptions held by the public about insurance fraud also play a role. Recently, it has become easy to find posts on SNS and internet cafes recruiting accomplices to deliberately cause accidents using vehicles to fraudulently claim insurance money. Furthermore, broker organizations have emerged that take a commission (10-30%) of medical fees in exchange for supplying patients to hospitals, reflecting the mistaken belief that insurance money is ‘easy money,’ which is permeating the general public.

To address these issues, the following measures should be implemented. First, the likelihood of detecting insurance fraud must be increased. Given the nature of insurance fraud involving both public and private insurance, information exchange between the two sides is essential to enhance detection effectiveness. However, under current law, it is impossible to verify public insurance information such as fraudulent receipt of health insurance benefits, necessitating legislative improvements.

Second, detected insurance fraud offenders must be strictly punished. In the United States, except for a few states, insurance fraud is classified as a serious economic crime and punished severely, with provisions requiring restitution upon confirmation of fraud. Since insurance fraud not only harms insurance companies but also leads to premium increases for honest policyholders, victimizing the entire population, it is necessary to significantly strengthen sentencing guidelines for insurance fraud.

Fourth, thorough recovery procedures must be established for insurance money fraudulently obtained. Even if insurance fraud is recognized criminally, victims must file separate civil lawsuits to recover damages, causing delays during which the fraudulently obtained funds may be concealed. Legal grounds are needed to allow immediate recovery of amounts confirmed as insurance fraud in criminal proceedings without separate civil trials.

Fifth, since insurance fraud cannot be eradicated by a single effort, there is a need to establish a government-wide organization to serve as a control tower to facilitate smooth cooperation among various government agencies and the insurance industry.

Above all, a shift in public perception that ‘insurance fraud will definitely be detected and the profits recovered’ must take place first, and legal and policy improvements should be devised so that insurance can function as a reliable social safety net.

Yoo Juseon, Professor, Department of Public Talent, Gangnam University

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