[Exclusive] 40% of Insurance Fraudsters Receive Only Fines... One-Third Get Suspended Sentences

Special Feature: [False Claims and Staged Accidents... That Money Was My Insurance Premium]
The Era of 1 Trillion Won in Insurance Fraud: Why Has It Grown So Large?
①-⑴ A Complete Survey of 137 Criminal Insurance Fraud Verdicts
One-Third of Cases Moved from Summary Orders to Formal Trials
66% Involved Automobile Insurance Fraud
Group Conspiracies More Common Than Solo Offenses

"Automobile insurance fraud poses a danger to road traffic and ultimately shifts the burden of loss onto honest policyholders, making it necessary to impose strict punishment. The defendant repeatedly committed these offenses, and none of the damages have been recovered. However, it appears that the defendant's schizophrenia contributed to each of these offenses. At the time of the crime, the defendant had no prior criminal record." (Seoul Eastern District Court ruling, January 11, 2024; Defendant fined 1.5 million won)

"The amount defrauded reached approximately 44 million won, and most of the damages have not been recovered. However, two accomplices led the crime and the defendant merely participated, so the actual profit obtained by the defendant was only a small fraction of the total. After the summary order was issued, the defendant repaid about 770,000 won of insurance money to one of the victimized insurance companies, which is now requesting leniency for the defendant." (Seoul Eastern District Court ruling, November 23, 2023; Defendant fined 7 million won)

Asia Economy obtained and analyzed all 137 finalized first- and second-instance verdicts related to "insurance fraud" issued over the past two years and three months, from 2023 to the end of last month, using Thomson Reuters Law&Business and the South Korean Court’s Judicial Information Disclosure Portal. The analysis found that most criminal cases of insurance fraud in Korea resulted in fines or suspended sentences, indicating that sentencing is generally lenient. Cases that initially received summary orders but were later brought to formal trial accounted for one-third of all verdicts. Most insurance fraud involved automobile insurance, and offenses were more often committed by groups acting in concert rather than by individuals. The analysis also confirmed that the methods of fraud are becoming increasingly sophisticated, including organized schemes and the use of brokers in intelligent crimes.

73.5% of Defendants Received Fines or Suspended Sentences... One-Third Requested Formal Trials After Summary Orders

During this period, a total of 246 defendants were tried. The analysis showed that the most common sentence was a fine. Out of 246 defendants, 99 (40.2%) were fined. Next, 82 defendants (33.3%) received suspended sentences. Fifty-one defendants (20.7%) were sentenced to imprisonment, while 13 (5.4%) were acquitted.

Most acquitted defendants were involved in long-term insurance cases. On July 4, 2023, the Jeju District Court acquitted a defendant charged with violating the Special Act on the Prevention of Insurance Fraud. The defendant had purchased indemnity insurance for his son as the insured. When his son was injured after falling while riding an electric scooter, the defendant, in collusion with an insurance agent, falsely claimed the injury was simply due to a fall and filed an insurance claim. Prosecutors argued that the insurance policy’s special terms excluded coverage for injuries sustained while operating a two-wheeled vehicle, and that the electric scooter qualified as such, thus constituting insurance fraud. However, the court held that since the special terms only specified two-wheeled vehicles, if an electric scooter was included, the insurer was obligated to explain this to the policyholder. The court found no evidence the insurer had provided such an explanation and acquitted the defendant.

One defendant (0.4%) received a suspension of sentence, which is granted to offenders whose crimes are relatively minor, deferring the sentence for a certain period. The harshest punishment was life imprisonment, given to Lee Eunhae, the main perpetrator of the 2022 Gapyeong Valley murder case. She was indicted for conspiring with her lover Cho Hyunsu to murder her husband in order to claim his life insurance payout.

Cases that began with summary orders but proceeded to formal trial at the defendant’s request accounted for about one-third of all verdicts. Of the 137 verdicts, 46 (33.6%) fell into this category. Summary orders are determined through written review when prosecutors judge that the offense warrants a fine rather than imprisonment. This means that many insurance fraud cases end with fines. If the defendant contests the sentence and requests a formal trial, the case number is marked as "Gojeong."

Two-Thirds of Insurance Fraud Involve Automobiles... Methods Range from Collusion to Staged Accidents and Are Increasingly Organized

The majority of insurance fraud cases targeted automobile insurance payouts. Of the 137 verdicts, 90 (66%) involved this type of fraud. Criminals seeking automobile insurance payouts typically use two main methods. The first is "collusion," where multiple people conspire to deliberately cause a traffic accident by dividing roles as perpetrator and victim. The second is "staged accidents," where they intentionally cause accidents targeting vehicles that violate traffic laws, such as running red lights or changing lanes, and then claim insurance payouts as if the accidents were accidental.

On January 22, the Seoul Western District Court sentenced defendant A to eight months in prison, suspended for two years, for violating the Special Act on the Prevention of Insurance Fraud. After responding to an online post advertising "high-paying part-time jobs," A contacted accomplices and divided roles as perpetrator and victim. They conspired to receive settlement money and other payouts from the insurance company and split the proceeds. They defrauded a total of 36,224,240 won under the pretense of settlement payments, medical expenses, and repair costs.

In some staged accident cases, the organization operated as systematically as organized crime groups. On January 27, 2023, the Seoul Central District Court sentenced 10 people to six months in prison, suspended for two years, for joining a criminal organization, participating in criminal activities, and violating the Special Act on the Prevention of Insurance Fraud. The group, consisting mainly of unemployed youths and students in their late teens to mid-20s, deliberately caused accidents as drivers and passengers by targeting vehicles that violated traffic laws. From August 2020, three members with prior convictions recruited others and assigned roles according to a hierarchy of "boss-director-general manager-manager-member." They rented a building in Gangnam, Seoul, to use as a dormitory and office, and even installed a bill counter to distribute insurance payouts. The boss oversaw the entire operation, while the director taught how to intentionally cause accidents and handled negotiations and payouts with insurance company staff.

The organization also had a profit-sharing system. After receiving insurance payouts, the boss would withdraw the cash and distribute 2 to 3 million won per case to the director, 1 to 1.5 million won to the general manager or managers, and 200,000 to 300,000 won to members, keeping the remainder for himself.

Cases Involving Fake Hospitalizations and False Indemnity Insurance Claims Using Brokers

Of the 137 verdicts, 34 (25%) involved long-term insurance fraud, such as fake hospitalizations to claim indemnity insurance or doctors issuing false medical certificates to attract patients. From 2019 to 2022, Dr. B, who operated a clinic in Jungnang, Seoul, exploited the fact that varicose vein procedures were not covered by national health insurance and could set prices at his discretion. He issued medical bills and receipts to patients as if the procedure cost 6.3 million won. Patients then claimed indemnity insurance payouts, of which Dr. B received 4 million won as a surgical fee, with the remaining amount returned to the patient in a "payback" scheme to defraud insurers.

Dr. B also hired three "patient referral brokers," paying them about 500,000 won per patient. Through this method, he defrauded insurance companies of a total of 4,966,270,682 won over 891 cases, the largest amount among the 137 verdicts. On January 16, 2023, the Seoul Northern District Court sentenced Dr. B to seven years in prison for violating the Special Act on the Prevention of Insurance Fraud and the Medical Service Act. The brokers received sentences ranging from one year to one year and six months in prison.

Some rulings noted that, while the defendant’s actions were significant, insurance companies and medical institutions also bore responsibility for enabling insurance fraud. On June 23, 2023, the Seoul Eastern District Court appellate panel sentenced defendant C to one year and two months in prison for defrauding 314,467,261 won by falsely claiming hospitalization for 2,093 days over eight years while holding 28 insurance policies. The court stated, "The defendant was able to repeatedly commit these offenses over a long period because insurance companies recruited policyholders and paid out claims without proper scrutiny, and some medical institutions allowed easy hospital admissions based solely on the defendant’s statements and clinical assumptions without thorough diagnosis."

Most Insurance Fraud Involved Group Conspiracy... Recidivism Rate at 22.7%

In 44 cases (32%), there were two or more defendants in a single case. Group conspiracies were more common than solo offenses. Excluding acquittals, 82 out of 129 verdicts (63.5%) involved group conspiracies. The case with the largest number of defendants involved 21 people, all convicted for staging traffic accidents. On March 15, 2023, the Pohang branch of the Daegu District Court sentenced 21 defendants to three years and six months in prison, among other sentences, for violating the Special Act on the Prevention of Insurance Fraud. The defendants staged 25 traffic accidents using acquaintances and received a total of 124,904,409 won in insurance payouts.

Cases of repeat insurance fraud accounted for 22.7% of all verdicts. The total amount of damages confirmed through finalized verdicts was 12,917,080,052 won. The largest single case involved 4,966,270,682 won in damages, while the smallest was 129,960 won.

<How the Verdict Data Was Compiled>

Only finalized first- and second-instance verdicts found by searching for the "Special Act on the Prevention of Insurance Fraud" since 2023 were included.

▲For cases with both first- and second-instance verdicts, duplicate counts of the number of offenses and defendants were avoided.

▲If the second-instance court dismissed the appeal and the first-instance verdict was upheld, cases sentenced before 2023 were excluded from the statistics, and the sentencing date of the actual verdict was used as the basis for inclusion.

▲Recidivism included cases where the same or similar fraud offenses were committed again.

▲Only the amount of damages recognized as proven in the verdicts was counted.

Editor's Note"They deceived, and my insurance premiums went up." For three consecutive years, insurance fraud damages have exceeded 1 trillion won, reaching an all-time high last year. A single false medical certificate, a few staged accidents, and each exaggerated medical bill have accumulated to a shocking total of 1.1503 trillion won. The problem is that all these costs are ultimately passed on to honest policyholders in the form of higher premiums. We conducted a comprehensive analysis of hundreds of verdicts and real cases to track how the crime of "insurance fraud" operates. We also explored technological responses and effective institutional reforms, seeking solutions to eradicate this crime.