Insurance Fraud Costs 1 Trillion Won Annually... Over 300 Insurance Workers Sanctioned in 4 Years

The number of insurance industry workers sanctioned for involvement in insurance fraud has exceeded 300 over the past four years. The scale of insurance fraud has been exceeding 1 trillion won annually.

According to data submitted by the Financial Supervisory Service to the office of Lee Jeong-moon, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, from 2020 to last year, 332 insurance industry workers were sanctioned for violating Article 102-3 of the Insurance Business Act, which prohibits involvement in insurance fraud by insurance-related workers. Most of them were insurance planners who received penalties such as suspension of work or cancellation of registration. The number of sanctioned insurance industry workers has been increasing: 61 in 2020, 69 in 2021, 109 in 2022, and 94 in 2023.

There are calls for stricter punishment when insurance planners and other insurance-related workers commit insurance fraud, as they possess extensive insurance knowledge and can induce more sophisticated fraud. Previously established special laws on insurance fraud had removed provisions for aggravated punishment of insurance industry workers. However, last month, the Supreme Court Sentencing Commission decided to introduce a provision including "cases where professionals such as those in insurance participate in the crime" as an aggravating factor for fraud crimes.

The Financial Supervisory Service is currently pushing for amendments to the Insurance Business Act to enable rapid cancellation of registration for planners involved in insurance fraud. It also plans to raise the sentencing standards for insurance fraud in courts.

Although the scale of insurance fraud continues to grow steadily, the number of cases reported by insurance companies to the Financial Supervisory Service or referred to investigative agencies remains minimal. The number of insurance fraud cases reported or referred by the Financial Supervisory Service to investigative agencies was 88 in 2022, 82 last year, and 46 from January to August this year. Additionally, the number of insurance fraud recognition reports received by the Financial Supervisory Service from insurance companies was 6,423 in 2022, 7,165 last year, and 4,828 from January to August this year. The amount of detected insurance fraud has steadily increased from 943.4 billion won in 2021 to 1.0818 trillion won in 2022, and 1.1164 trillion won last year. The number of detected individuals last year was 109,522, a 6.7% increase compared to the previous year.

Assemblyman Lee Jeong-moon stated, "Insurance fraud is a serious crime that causes premium increases for honest policyholders and requires strict investigation and punishment. Since sentencing standards have been strengthened to allow aggravated punishment when insurance industry workers are involved in fraud, it is also necessary to strengthen regulations restricting employment in the insurance industry or qualifications for planners."