The reason for the increase in insurance fraud is the "low level of punishment," a report pointed out. Especially in auto insurance, the number of fraudulent claims, including overbilling, is increasing, but the punishment is still limited to a fine, as noted.
The Korea Insurance Research Institute (KIRI) said so in its recent report “Status of Insurance Fraud Detection and Punishment” (authored by senior research fellow Baek Young-hwa), analyzing the amount of insurance fraud detected and the types of fraud.
According to the Financial Supervisory Service, the amount of insurance fraud detected last year was 1.11 trillion won ($820.15 million), up 34.6 billion won from the previous year. The number of people caught in insurance fraud increased by 6,843 to 109,522.
Auto insurance and long-term insurance accounted for 49.1 percent and 43.4 percent of the total, respectively. Due to the increase in auto insurance fraud, the amount of fraud detected increased by 77.1 billion year-on-year to 547.6 billion.
Insurance fraud, falsification and alteration of medical diagnoses, and overcharging for hospitalization and surgery took the largest share, accounting for 18.2 percent. This was followed by manipulation and exaggeration of drivers, damages, and accident dates, with 17.6 percent, and drunk and unlicensed driving, with 12.9 percent.
The report pointed out that insurance fraud did not decrease even after implementing the Special Act against Insurance Fraud because of light punishment, such as “a slap on the wrist.” According to the results of prosecution dispositions for insurance fraud offenses in 2022, the proportion of old-style summary and deferred indictments was still high.
According to the insurance fraud disposition results released by the Supreme Prosecutors Office, of the 7,385 people prosecuted for insurance fraud in 2022, 2,845 were indicted, and 1,616 were disposed of under the old summary indictment system. Some 1,460 were not indicted, and 1,268 were granted deferred indictment.
The share of summary indictments in general fraud stood at 30.9 percent. Among those not indicted, 61.8 percent were deferred from indictment.
According to the sentencing results of the first instance criminal court for insurance fraud in 2022, it was still more likely to result in a fine and less likely to result in a prison sentence than general fraud.
According to data released by the National Court Administration in September last year, the proportion of fines and suspended sentences among the results of first-instance criminal trials in 2022 was 7.5 percent for general fraud and 39.6 percent for insurance fraud.
In 2022, 60.8 percent of the sentences for general fraud were imprisonment, compared to 22.5 percent for insurance fraud.
"Despite the increase in the amount of insurance fraud detected and the number of people detected, especially the rise of insurance fraud in auto insurance, the share of insurance fraud sentenced to a fine remained high while that of imprisonment was low compared to general fraud," the report said.