Insurance fraud hits record levels, but prevention act remains dormant

2023.11.13 15:07:02 | 2023.11.13 16:40:16

[Image source: Pixabay]이미지 확대

[Image source: Pixabay]

Insurance fraud is becoming more sophisticated and evolving into an organized crime in South Korea, with an increasing number of instances involving insurance agents or collusion among hospital workers.

According to sources from the Financial Supervisory Service on Sunday, the amount of insurance fraud detected in the first half of 2023 totaled 623.3 billion won ($471.29 million). This is a historic high, increasing by 21.8 percent from the 511.5 billion won recorded in the first half of 2022 and surpassing the 600 billion won mark for the first time. The total amount of insurance fraud detected this year is expected to surpass the previous year’s record of 1.82 trillion won. By insurance type, fraud related to long-term insurance and auto insurance accounted for 92.6 percent of the total amount of insurance fraud.

The number of individuals caught for insurance fraud in the first half of this year rose by 13.4 percent year-on year to 55,051, exceeding 50,000 for the first time in a half-year period. At this rate, this year’s total will surpass a record-breaking 110,000.

Of those caught for insurance fraud in the first half of this year, 914 were insurance agents, up 27.2 percent year-on-year, with the number of hospital workers caught at 614. There were also 11,002 caught who were ordinary office workers, 6,662 unemployed or temporary workers, 5,225 full-time housewives, and 2,945 students.

As insurance fraud becomes more organized and widespread, both the amount of money involved and the number of people caught are on the rise. Recently, 126 people, including a hospital director, insurance agents, and patients, were arrested for falsifying physical therapy receipts to collect insurance money at a hospital in Pohang.

“These days, there are many cases of insurance fraud that are organized by insurance agents and hospital workers and involved ordinary people, making it a group activity,” an insurance industry insider said.

Despite the growing severity of insurance fraud, the slow progress in legislation in the National Assembly is frustrating for those in the insurance industry, with the Special Act on Prevention of Insurance Fraud remaining unamended since its enactment in 2016. A total of 17 amendment bills were proposed in the 21st National Assembly amid controversy over the act’s effectiveness, with a proposed amendment passing the legislative subcommittee of the National Policy Committee at the National Assembly in July 2023 and being presented to the full committee, but it has been dormant for four months due to political disputes between the ruling and opposition parties.

The proposed amendment includes provisions that will punish those who facilitate and encourage insurance fraud at the same level as the perpetrators (up to 10 years imprisonment or a fine of up to 50 million won). The insurance company will also be granted the authority to recover improperly paid insurance benefits from those found guilty of fraud and terminate the relevant contract. The amendment also includes provisions for heavier penalties for insurance industry employees, medical professionals, and auto management business operators caught engaging in insurance fraud compared to the public.

By Lim Young-sin and Yoon Yeon-hae

[ⓒ Pulse by Maeil Business Newspaper &, All rights reserved]