Lighter Penalties for Insurance Fraud Compared to General Fraud... Half Receive Fines Without Trial

Fines Account for 30-40%... General Fraud Under 10%
More Than Half of General Fraud Cases Result in Imprisonment... Only 20% for Insurance Fraud

Recent findings indicate that punishments for insurance fraud are lighter compared to general fraud. More than half of the cases were concluded with fines without formal trials, and the proportion of cases where criminal charges were acknowledged but not prosecuted was also significantly higher than for general fraud. The proportion of prison sentences handed down was lower compared to general fraud. There are calls for stricter investigation and punishment of insurance fraud.

According to the report "Review of Insurance Fraud Punishment Status" released by the Korea Insurance Research Institute on the 20th, among cases prosecuted for insurance fraud, the proportion concluded with fines without formal trials (summary order) was 58.0% in 2020 and 51.6% in 2021. In comparison, the corresponding figures for general fraud were 35.1% and 30.0%, respectively, showing a difference of more than 20 percentage points.

The proportion of non-prosecution decisions where criminal charges were acknowledged but prosecution was deferred (suspension of prosecution) was also much higher for insurance fraud than for general fraud. The suspension of prosecution rate for insurance fraud was 52.4% in 2020 and reached 86.4% in 2021. In contrast, general fraud cases had rates of 11.8% in 2020 and 52.4% in 2021.

Even in cases that proceeded to trial, punishments for insurance fraud were lighter. The proportion of fines was higher and the proportion of actual prison sentences was lower compared to general fraud.

In first-instance criminal trials for insurance fraud, the proportion of cases resulting in fines or suspended fines was in the 30-40% range. Considering that this figure is below 10% for general fraud, this is considered excessively high.

Furthermore, while the proportion of actual prison sentences with fixed-term imprisonment for general fraud was relatively high at the late 50% range, insurance fraud cases only accounted for about 20%.

This has led to criticism that the legislative intent of the Special Act on the Prevention of Insurance Fraud, enacted in 2016, is being undermined. Several amendment bills to the Special Act on the Prevention of Insurance Fraud have already been proposed in the National Assembly.

The report criticizes that to better realize the legislative intent and ensure effectiveness, insurance fraud should be investigated and punished more strictly. Baek Young-hwa, a research fellow at the Korea Insurance Research Institute, stated, "In the case of general fraud, especially soft fraud, the methods of the crime or the amount of damage may not be as severe compared to other crimes, or the offender may be a first-time offender, which can lead to lighter punishments. However, insurance fraud should not be judged by the same standards as general fraud but should consider the special nature of 'fraud using the insurance system'."

Insurance fraud does not only result in losses to a specific victim (the insurance company) but can harm a large number of honest insurance consumers and undermine the foundation of the insurance system, which serves as a social safety net. Research fellow Baek emphasized, "Considering these characteristics, there is a fundamental need for strict punishment, which is precisely the legislative intent of the Special Act on the Prevention of Insurance Fraud. It is also worth considering establishing separate investigation and sentencing guidelines for insurance fraud and explicitly stating the principle of strict punishment for insurance fraud within those guidelines."

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