Gangsters, Hospitals, and Designers Involved... 2 Billion Won Organized Insurance Fraud Uncovered

Financial Supervisory Service Collaborates with Seoul Metropolitan Police Agency
Fraudulent Surgery Records Used to Embezzle 2.1 Billion KRW in Indemnity Insurance Claims

An organized insurance fraud scheme involving organized crime groups, medical clinics, and insurance agents has been uncovered.

On the 28th, the Financial Supervisory Service (FSS) announced that it had apprehended a corporate-type insurance fraud ring that embezzled 2.1 billion KRW in insurance payouts through false surgical records for conditions such as gynecomastia. Based on information received at the 'Insurance Fraud Reporting Center,' the FSS requested an investigation from the Seoul Metropolitan Police Agency in September last year and arrested most of the suspects this month.

A member of the organized crime group, Mr. A, established a corporate broker organization and planned the crime as the mastermind of the insurance fraud. Mr. B, the head of this organization, acted as a director of the colluding hospital and recruited fake patients with actual health insurance coverage. Mr. C, an insurance agent affiliated with a major corporate General Agency (GA), analyzed the insurance product coverage for the fake patients recruited by Mr. A’s organization, encouraged them to purchase additional insurance, and handled false insurance claims on their behalf. They even distributed manuals on how to file complaints with the FSS if the insurer refused to pay the claims.

Medical staff members, including Mr. D and Mr. E, shared lists of fake patients with brokers via Telegram and issued false surgical records (gynecomastia and hyperhidrosis). They also settled commissions with brokers monthly based on performance. Some medical staff directly administered or distributed leftover narcotic anesthetics such as propofol that were not used in surgeries.

Approximately 260 fake patients, including many affiliated with organized crime groups, mainly stayed in hospital rooms for six hours, undergoing only simple blood tests before discharge, and received false medical records to claim 2.1 billion KRW in insurance payouts (an average of 8 million KRW per person). They exploited the fact that staying in a hospital room for more than six hours is recognized as inpatient care rather than outpatient, which results in higher insurance payouts. Some organized crime members created fake scars on their chests to simulate surgical marks or submitted pre- and post-surgery photos of other patients issued by the hospital to avoid detection.

This case is the first tangible result since the FSS and the National Police Agency signed a Memorandum of Understanding (MOU) on January 11 to eradicate organized insurance fraud involving brokers and medical institutions. Recently, broker organizations have become increasingly corporate and large-scale, using sophisticated methods to lure patients. Not only hospitals and brokers leading the insurance fraud but also patients who colluded or participated in response to tempting offers have faced criminal penalties. Insurance policyholders should be especially cautious to avoid becoming involved in insurance fraud.

An FSS official stated, "Insurance fraud undermines the foundation of the insurance system and is a representative financial crime that infringes on the livelihood of the public by causing premium increases for honest policyholders. The FSS and the National Police Agency will continue to actively cooperate to eradicate insurance fraud."