Korea acts to prevent insurance fraud, but concerns remain

2024.04.03 09:30:01 | 2024.04.03 09:30:16

[Graphics by Song Ji-yoon]이미지 확대

[Graphics by Song Ji-yoon]

South Korea is stepping up its efforts to combat insurance fraud with an amendment to the law set to take effect in August 2024, but concerns remain over the lack of penalties and public disclosure for professionals involved in insurance fraud, according to industry insiders.

While the amendment could be effective in detecting brokers, industry insiders question its effectiveness in uncovering cases involving professionals such as insurance industry employees or medical personnel. As insurance fraud increases in sophistication and organization, it is starting to encompass other crimes such as manipulation of facts and violation of medical laws.

Statistics released by the Financial Supervisory Service show that the most common form of insurance fraud in 2023 was manipulation of accident details or exaggeration of damages, which accounted for 59.3 percent of cases. Manipulation of medical records and overcharging for hospitalization or surgery accounted for 18.2 percent within this category, but only 1 percent of all cases detected involved medical personnel or hospital employees.

Penalties for insurance fraud remain relatively lenient. The proportion of fines or suspended sentences for insurance fraud offenses was 30 to 40 percent over the period from 2017 to 2021, higher than the proportion for general fraud cases, which was around 10 percent. While the proportion of actual prison sentences for general fraud cases was over 50 percent, it was in the 20 percent range for insurance fraud.

Experts highlight the need for stricter investigation and punishment to effectively deter insurance fraud. “Imposing administrative sanctions such as business suspension or license revocation for those exploiting their professional expertise is crucial,” Paik Young Hwa from the Korea Insurance Research Institute said.

In response to the escalating sophistication of fraud schemes, insurance companies are deploying advanced technologies including artificial intelligence (AI) to bolster their fraud prevention measures. Samsung Fire & Marine Insurance Co. implemented an AI-driven insurance fraud prevention system in 2023 that focuses on predictive detection. For its part, Hyundai Marine & Fire Insurance Co. enhanced its predictive modeling to detect fraud at each stage of insurance payment, significantly boosting accuracy. Detecting fraud using its AI technology accounts for a quarter of all fraud detected in the insurance industry, according to the company.

By Lim Young-sin, Park Na-eun and Chang Iou-chung

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