Over 3 Years Since Proposal... Insurance Fraud Prevention Act Still Pending with 16 Cases

Urgent Need to Strengthen Insurance Fraud Penalties... "Rapid Implementation Required"

It has been revealed that 16 bills aimed at preventing insurance fraud, titled the 'Amendment to the Special Act on the Prevention of Insurance Fraud,' are still pending in the 21st National Assembly.

On the 16th, the Korea Insurance Research Institute analyzed this in a report titled 'Status of the Proposed Amendments to the Special Act on the Prevention of Insurance Fraud and Key Contents.' The Special Act on the Prevention of Insurance Fraud was enacted and implemented in 2016 with the purpose of establishing a sound order in insurance transactions and preventing insurance fraud in advance to reduce social losses. In the past, insurance fraud was punished under the criminal law as fraud without distinction from other types of fraud, but the enactment of the special law strengthened the punishment.

The pending amendments mainly include provisions to strengthen penalties for insurance fraud committed by insurance industry workers, medical personnel, and automobile management business workers. The amendments propose to strengthen penalties for insurance fraud committed by insurance planners, insurance agencies, insurance brokers, loss adjusters, loss adjustment corporations, medical personnel, medical institution workers, automobile management business operators, and automobile management business workers.

The current penalty is imprisonment for up to 10 years or a fine of up to 50 million KRW. The amendments include provisions to increase this to imprisonment for up to 15 years or a fine of up to 100 million KRW (as proposed by Representative Yoon Chang-hyun of the People Power Party). Some amendments also propose increasing the statutory penalty itself by up to 50%. In some cases, the amendments add company executives and employees of insurance companies to the scope of strengthened penalties.

There are also provisions to establish obligations for the return of insurance payments made due to insurance fraud or the insurer's right to terminate insurance contracts. If a person is convicted of insurance fraud, they must immediately return the insurance payments already received, and the insurer may terminate the insurance contracts of those who committed insurance fraud.

This trend has emerged because current law does not have provisions for recovering insurance payments made due to insurance fraud. Even if a conviction for insurance fraud was made, insurers had to file separate lawsuits to recover insurance payments. Criminals hid assets, making recovery difficult, and unnecessary litigation costs were added.

Other contents included in the amendments are ▲ introduction of the financial authorities' right to request data ▲ prohibition of mediation of insurance fraud acts ▲ improvement of the hospitalization appropriateness review system ▲ establishment of a government joint task force on insurance crimes ▲ increase of fines for insurance fraud crimes ▲ aggravated punishment for serious crimes committed for the purpose of insurance fraud ▲ introduction of a system to publicly disclose the names of insurance industry workers punished for insurance fraud.

Baek Young-hwa, a research fellow at the Korea Insurance Research Institute, said, "I hope that through thorough review and active discussion of the various issues proposed in the amendments, the revision of the Special Act on the Prevention of Insurance Fraud will be actively promoted."