Will Stricter Punishments for Insurance Fraudsters Finally Be Possible This Time... Growing Expectations

Expectations Rise for Passage of Insurance-Related Law Amendments Pending at Regular National Assembly Opening
Focus on Strengthening Insurance Fraud Penalties and Simplifying Claims for Actual Expense Insurance Amendments

[Asia Economy Reporter Changhwan Lee] As the first regular session of the National Assembly under the Yoon Seok-yeol administration begins, the insurance industry is hopeful that the long-pending insurance-related law amendments may gain momentum for passage.

According to industry sources on the 4th, insurance companies identify two insurance-related laws as the most urgent for passage: the amendment to the Special Act on the Prevention of Insurance Fraud and the amendment to the Insurance Business Act related to simplifying claims for indemnity health insurance (실손보험, Silson Insurance).

Regarding the amendment to the Special Act on the Prevention of Insurance Fraud, there is consensus between the ruling and opposition parties, raising expectations for its passage within the year. Currently, nine bills amending the Special Act on the Prevention of Insurance Fraud have been proposed in the National Assembly. The key points of the amendments include strengthening the enforcement authority of the police and financial authorities, enhancing penalties for those involved in insurance fraud, and reinforcing the recovery of insurance payouts.

The Special Act on the Prevention of Insurance Fraud was enacted in 2016 by both ruling and opposition parties as insurance fraud became increasingly serious. Although the National Assembly enacted this special law to reduce insurance fraud, the number of fraud cases has continued to rise annually.

According to the Financial Supervisory Service, the number of detected insurance fraud cases in Korea reached 97,629 last year. This is a 23.3% increase compared to 79,179 cases in 2018 over three years. The amount detected for insurance fraud also increased from 898.6 billion KRW in 2020 to 943.4 billion KRW last year, and there is speculation that it may exceed 1 trillion KRW this year.

As controversy arose over the limited effectiveness of the Special Act on the Prevention of Insurance Fraud, lawmakers from both sides have repeatedly proposed amendments focusing on strengthening penalties and investigative authority, but none have been passed so far.

Insurance Fraud Illustration

However, this year, with greater interest from the National Assembly than in previous years, expectations for passage are rising. In June, lawmakers from both parties held a forum on the direction of amendments to the Special Act on the Prevention of Insurance Fraud, and subsequently gathered opinions through meetings emphasizing the need for measures to prevent insurance fraud.

Yoon Kwan-seok, a member of the Democratic Party of Korea who proposed the amendment earlier this year, stated, "Since the enactment of the Special Act on the Prevention of Insurance Fraud in 2016, insurance fraud has actually increased by more than 32%, raising questions about the law's effectiveness. However, no amendments have been made in the six years since its introduction. To eradicate increasingly organized and sophisticated insurance fraud, a comprehensive effort from related institutions is necessary," he emphasized.

There are also calls for the passage within the year of the amendment to the Insurance Business Act related to simplifying claims for indemnity health insurance to improve convenience for the public.

Indemnity health insurance claims procedures have been criticized for being inefficient and complicated. Patients must obtain various documents from hospitals and personally submit them to insurance companies to claim indemnity insurance benefits.

The Anti-Corruption and Civil Rights Commission recommended as early as 2009 that the indemnity insurance claim process was complicated and needed simplification. Since then, the National Assembly has repeatedly discussed simplifying indemnity insurance claims, but no conclusion has been reached yet.

The related amendment currently pending in the National Assembly's Legislation and Judiciary Committee generally proposes that the medical institutions (hospitals and clinics) electronically transmit the necessary supporting documents for insurance claims directly to insurance companies. This would eliminate the need for patients to submit documents themselves.

Some amendments also suggest that medical institutions submit supporting documents to the Health Insurance Review and Assessment Service (HIRA), which would then forward them in a non-electronic form. This is intended to prevent potential personal information leaks during the document transmission process.

However, there are also forecasts that the bill related to simplifying indemnity insurance claims will face strong opposition from the medical community, making passage difficult. The Korean Medical Association established a 'Task Force (TF) for Responding to the Simplification of Indemnity Insurance Claims' in July to block amendments to the Insurance Business Act related to this issue.

The Medical Association is concerned about the leakage of sensitive personal information such as hospital medical records. They argue that if patient medical information is leaked to insurance companies, there is a risk that insurance products could be selectively marketed to those patients later, and this must be prevented.