[Exclusive] "My Bag Was Stolen in the Philippines" ... The Truth Behind the 1 Million KRW Travel Insurance Claimant

Travel Insurance 'Personal Belongings Damage' and Golf Insurance 'Hole-in-One' Payouts Surge
Many Cases Go Unpunished Due to Litigation Costs and Malicious Complaints

Insurance fraud is infiltrating everyday life. Because investigations and media coverage tend to focus on organized crimes or cases involving large financial damages, one-off small-scale frauds are less frequently exposed compared to their actual occurrence. As a result, many people commit insurance fraud without significant feelings of guilt.

Payouts for 'Personal Belongings Damage' in Travel Insurance Near 10 Billion KRW... Number of Cases Up 87.3% Year-on-Year

Travel insurance is a prime example. Since travel insurance is a short-term policy costing around 10,000 KRW per day, and it is difficult for insurers to verify whether theft or damage actually occurred, this loophole is frequently exploited.

Person A purchased travel insurance from Insurance Company B before departing for the Philippines. While dining at a night market in the Philippines, Person A claimed that their bag, which was placed next to the table, was stolen and filed an insurance claim. The bag allegedly contained 11 items, including a Galaxy Tab, and Person A claimed damages amounting to 1.86 million KRW, submitting receipts as evidence. Insurance Company B paid out 1 million KRW, which was the maximum coverage limit for lost personal belongings under Person A's policy.

However, the items Person A reported as stolen were the same ones previously reported as stolen in Hong Kong, for which they had also received a 1 million KRW payout at that time. Person A continued this scheme, committing insurance fraud six more times and illicitly obtaining over 7 million KRW in total insurance payouts before being caught. In September 2023, the Uijeongbu District Court imposed a fine of 3 million KRW on Person A.

Person A's case was only detected because they received large sums of insurance money using the same method six times. Small-scale frauds involving amounts of several hundred thousand KRW often go unnoticed. According to a comprehensive review by Asia Economy of 137 court rulings for violations of the Special Act on Insurance Fraud from 2023 to the first quarter of this year, only two cases?including Person A's?were conclusively ruled as travel insurance fraud.

However, industry insiders agree that travel insurance fraud is on the rise. Even when fraud is detected, if the amount is small, cases often do not proceed to trial as long as the perpetrator reimburses the insurer. An insurance company representative said, "If we proceed with litigation, some people retaliate with malicious complaints," adding, "For small amounts, it is often best for the insurer to simply pay out the claim and move on."

According to data obtained by Asia Economy from eight insurance companies selling travel insurance (Samsung, Hyundai, KB, Meritz, Hanwha, NH Nonghyup, AXA, and KakaoPay), payouts for personal belongings damage were 1.9 billion KRW in 2022, 5.8 billion KRW in 2023, and 9.5 billion KRW in 2024, showing a sharp increase every year. During the same period, the number of cases surged from 8,937 to 31,696 to 59,370. While these figures are not directly linked to insurance fraud, the insurance industry notes that there is a strong correlation.

Cancelling Hole-in-One Expenses After Payment... Inflated Receipts Lead to Illicit Insurance Claims

With the rapid increase in the golfing population, everyday insurance fraud is also becoming more frequent in golf insurance. The hole-in-one rider is a representative example of a product that is often abused for fraud. This rider compensates policyholders for expenses related to a hole-in-one, such as commemorative gifts or banquet costs.

Person A purchased an insurance product with a hole-in-one expense rider. One year and seven months later, Person A achieved a hole-in-one at a golf course in Yeosu, Jeollanam-do. Subsequently, Person A submitted receipts to the insurer showing payments totaling 5.2 million KRW at two shops in Gwangyang for hole-in-one related expenses and received a 5 million KRW insurance payout. However, 3.7 million KRW of these expenses were fraudulent, as the payments were canceled immediately after approval. In 2023, the Gwangju District Court fined Person A 1 million KRW.

Payouts for the hole-in-one rider have also increased noticeably in recent years. According to data obtained by Asia Economy from six non-life insurers (Samsung, Hyundai, KB, Meritz, Hanwha, and NH Nonghyup), payouts for hole-in-one insurance rose from 1.27 billion KRW in 2022 to 1.6 billion KRW in 2024, an increase of 26.2%. The number of claims jumped 62.1% during this period, from 563 to 913 cases.

In addition, small-scale insurance fraud has recently become common in policies such as polyp insurance and pet insurance. In the case of polyp insurance, some people falsely claim to have had polyps removed after a health checkup, even though no procedure was performed, in order to collect insurance payouts. As insurers have recently raised the coverage amount for polyp insurance to as much as 1 million KRW in a competitive market, there have been cases where insurance agents recruited multiple policyholders and facilitated improper payouts.

'Failure to Disclose Material Facts' Is Also Insurance Fraud... The Mindset of 'Everyone Else Does It, So It's Okay' Must Change

Failure to disclose material facts also constitutes insurance fraud. Policyholders are required to inform insurers of any past or current illnesses when entering into an insurance contract. If this information is concealed and insurance money is obtained fraudulently, only honest policyholders end up suffering losses.

According to statistics from the Financial Supervisory Service, the amount of insurance fraud detected due to failure to disclose material facts was 106.3 billion KRW in 2022, 100.5 billion KRW in 2023, and 70.6 billion KRW in 2024. Over the past three years, this type of fraud accounted for an average of 8.2% of all insurance fraud, which is a significant proportion. Kim Taehun, head of the Insurance Fraud Response Team at the Financial Supervisory Service, stated, "As the economy has slowed recently, people seem to develop a complacent attitude, thinking, 'Everyone else does it, so I can too.' Insurers need to refine their products to reduce the risk of encouraging moral hazard among policyholders."

Editor's Note"They deceived, and my insurance premiums went up." The amount of damages caused by insurance fraud has exceeded 1 trillion KRW for three consecutive years, reaching an all-time high last year. Each fake medical certificate, every staged accident, and every exaggerated claim for medical expenses has accumulated to create the staggering figure of 1.1503 trillion KRW. The problem is that all these costs are ultimately passed on to honest policyholders in the form of higher premiums. We have conducted a comprehensive analysis of hundreds of court rulings and real-life cases to trace how the crime of 'insurance fraud' operates. We also explored technical responses and effective institutional reforms, seeking solutions for eradication.