Only 18% of Insurance Fraud Cases Detected by Insurers Result in Prosecution
"Insurance Fraud Is Becoming More Serious, Requiring More Active Response"
[Asia Economy Reporter Changhwan Lee] It has been revealed that insurance companies often detect insurance fraud but do not file charges if no actual damage occurs, letting the cases slide. As insurance fraud becomes increasingly serious, there are calls for insurance companies to respond more actively to fraud.
According to data on the "Detection and Prosecution Status of Insurance Fraud by the Top 10 Domestic Life and Non-life Insurance Companies" received by Democratic Party lawmaker Hwang Unha from the Financial Supervisory Service on the 4th, over five years from 2017 to 2021, non-life insurance companies detected 389,654 cases of insurance fraud (3.8 trillion KRW), and life insurance companies detected 35,324 cases (240 billion KRW) of insurance fraud.
Combined, this amounts to 424,978 cases, approximately 4 trillion KRW worth of insurance fraud. Among these, insurance companies only proceeded with prosecution in 78,799 cases (18%) and 940 billion KRW (23%).
By company, over the past five years, Samsung Fire & Marine Insurance detected 102,460 cases and prosecuted 14,574 cases (14.2%), DB Insurance prosecuted 10,000 out of 89,227 cases (11.2%), and Hyundai Marine & Fire Insurance prosecuted 11,951 out of 87,116 cases (13.6%).
During the same period, Samsung Life Insurance detected 22,571 cases and prosecuted 10,178 cases (44.8%), Kyobo Life Insurance detected 3,381 cases and prosecuted 2,021 cases (59.7%), and Tongyang Life Insurance prosecuted 1,043 out of 2,902 cases (35.9%).
The higher number of detections by non-life insurance companies compared to life insurance companies is understood to be because most insurance fraud occurs in automobile insurance and actual medical expense insurance.
Regarding why insurance companies do not take legal action even after detecting insurance fraud, they explained that it is often because the amount fraudulently obtained has been recovered or no actual insurance payout was made.
They also responded that they do not prosecute in cases where loss reduction objectives have been achieved through cancellation, recovery, or exemption. This is interpreted as meaning that if there is no actual loss to the insurance company rather than whether fraud occurred, prosecution is often not pursued.
However, as insurance fraud has recently increased socially, there are calls for insurance companies to respond more actively to fraud. According to the Financial Supervisory Service, the amount detected for insurance fraud by year has steadily increased from 730.2 billion KRW in 2017 to 798.2 billion KRW in 2018, 880.9 billion KRW in 2019, 898.6 billion KRW in 2020, and 943.4 billion KRW in 2021.
This year, a total of 689.2 billion KRW was detected through August, and if the current trend (an average of 86.15 billion KRW per month) continues until the end of the year, the annual detection amount is expected to exceed 1 trillion KRW for the first time ever.
Lawmaker Hwang said, "As the amount and number of insurance fraud cases continue to increase, becoming a social problem, it is not desirable for insurance companies to arbitrarily decide whether to prosecute based on their own judgment. To prevent recurrence of insurance fraud and reduce the social costs associated with it, it is necessary to comprehensively improve the processes related to detection and punishment of insurance fraud."
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