[The Editors' Verdict] Insurance Fraud Threatens the National Economy: How Long Will We Let It Go?

Record-High Insurance Fraud Detection Amounts to 1.1503 Trillion Won, Over 100,000 Offenders
A Structural Social Problem: Young People Lured by 'Easy Money' and Committing Intentional Accidents
Collusion via Social Media: Brokers, Organized Crime, M

"A Republic of Korea Tainted by Insurance Fraud: The Public Becomes the Victims."

South Korea is now a republic of insurance fraud. Last year, the amount of insurance fraud detected reached a record high of 1.1503 trillion won. This figure has increased for five consecutive years, and the number of individuals caught has surpassed 100,000. The steadily rising statistics every year prove that this crime is not a simple deviation but a serious structural problem in society.

Insurance fraud is concentrated in specific types of insurance: long-term insurance and auto insurance. Last year, auto insurance accounted for 49.6% (570.4 billion won) of all insurance fraud, followed by long-term insurance at 485.3 billion won (42.2%). The problem lies in the age group committing these crimes. In auto insurance fraud, which is particularly prevalent, men in their 20s and 30s make up 90% of the perpetrators. Young people, facing economic recession and employment difficulties, are turning to insurance fraud as an 'easy way to make money.' If this trend is left unchecked, it will undermine the very future of our society. There is an urgent need for government-level special measures to prevent young people from being tempted to commit intentional accidents.

Moreover, insurance fraud is becoming increasingly organized and specialized. Not only are there conspiracies to stage intentional accidents through social networking services (SNS), but there is also a surge in large-scale, organized fraud involving brokers, organized crime groups, medical professionals, and insurance planners working together. Notable examples include an illegal multi-level marketing fraud scheme involving more than 100 active insurance planners and amounting to over 100 billion won, as well as a case in which a rehabilitation hospital defrauded 6 billion won in indemnity insurance claims.

Despite this, punishments remain lenient. Although the Special Act on Insurance Fraud Prevention was amended in August last year, its effectiveness has been minimal. The number of investigation requests soared from 8,245 cases in 2022 to 9,657 cases in 2024, but the proportion of cases that resulted in final criminal penalties (such as imprisonment or fines) dropped from 38% in 2022 to the 20% range in 2024. Most punishments still end with suspended sentences or fines. Repeatedly lenient punishments only serve to encourage repeat offenses.

To eradicate insurance fraud, simply amending laws or increasing fines is not enough. The key is to establish a 'control tower' at the pan-government level. Currently, the Financial Supervisory Service, the National Police Agency, the National Health Insurance Service, and individual insurance companies all operate separately, resulting in slow and inefficient information sharing. It can take several weeks to obtain a single CCTV video, and verifying a diagnosis of a specific disease or the fact of a long-term hospitalization can take two to three years. The United States and the United Kingdom are already systematically responding to insurance fraud through joint public-private task forces. Korea must also implement data integration, AI-based analysis, and the operation of specialized investigative organizations.

The problem of professionals such as insurance planners participating in fraud can no longer be overlooked. In the past three years, the number of planners caught has surged by 71%, yet there are still no provisions for aggravated punishment. Planners with criminal records are returning to the field and committing fraud again and again. Real sanctions such as 'one-strike-out' rules, permanent expulsion, and public disclosure of offenders' names are necessary. Other professional groups, such as auto repair workers, should not be exempt from these measures.

Insurance fraud is not just a problem for insurance companies. Leakage of insurance payouts leads to higher premiums, and the damage is ultimately borne by all honest citizens. The fight against insurance fraud is not a 'choice' but a 'necessity.' As emphasized in the special feature series published last month by the Asia Economy Economic and Financial Department, the following must be actively pursued: establishment of a control tower, accumulation and utilization of AI-based big data, expansion of specialized insurance fraud investigators, legislation for aggravated punishment and permanent expulsion of planners and professionals, and strengthened management of criminal records. If we fail to stop this now, it will return as an even greater disaster. We must no longer turn a blind eye to this grim reality.