Only about 20% of the alleged insurance fraud amounts at major insurers last year were actually recovered. That is because, during court proceedings to claw back insurance payouts, alleged fraudsters often have already squandered the money, and current law has no provision to immediately reclaim the alleged amounts. The industry is calling for stronger laws to prevent insurance fraud and raise recovery rates.
According to data received by People Power Party lawmaker Lee Yang-su's office from the Financial Supervisory Service on the 30th, alleged insurance fraud amounts that eight major life and non-life insurers referred to investigative authorities last year totaled 110 billion won. During the same period, 23.6 billion won (21.5%) in alleged insurance fraud was recovered. Alleged insurance fraud amounts are tallied based on cases uncovered by the Financial Supervisory Service or police in which the allegations were confirmed or the suspect admitted them in advance. Afterward, insurers secure claims through civil litigation and recover the corresponding amounts.
Last year, there was a case in which a hospital director carried out an organized scheme to siphon off indemnity insurance payouts. Patients were given cosmetic procedures, then falsified medical records were created to claim indemnity insurance benefits. In another case, a plastic surgery clinic employee performed cosmetic surgeries on patients and then manipulated surgical records to steal hospitalization insurance benefits.
Over the past five years, the recovery rate for alleged insurance fraud amounts has steadily increased, but it still hovers around 20%. The recovery rate for alleged insurance fraud amounts was 15.8% in 2021, 12% in 2022, 17.2% in 2023, and 19.3% in 2024. An Financial Supervisory Service official said, "Even if an insurer pursues legal procedures to recoup alleged amounts, full recovery is practically difficult when the suspect has no assets to reclaim."
In 2022, Democratic Party of Korea lawmaker Kim Byung-wook proposed a bill to require the immediate return of improperly claimed insurance payouts upon a final guilty verdict for insurance fraud, but the amendment to the Special Act on the Prevention of Insurance Fraud that passed in 2024 did not include this measure. The National Assembly's Legislation and Judiciary Committee excluded it, viewing the recovery of illicit gains as a matter of private contracts.
In Mar. last year, Democratic Party of Korea lawmaker Kang Jun-hyun and 15 others proposed a partial amendment to the Special Act on the Prevention of Insurance Fraud to disclose the identities of those who committed insurance fraud in an organized manner or whose illicit gains exceeded a certain threshold. However, the bill remains at the standing committee review stage.
An industry official said, "Because unrecovered alleged insurance fraud amounts can ultimately lead to higher premiums and increase the burden on consumers, institutional safeguards through legal amendments and post-incident measures are needed."