The government is conducting reinvestigation on a murder case that occured in Gapyeong, Gyeonggi Province, on July 30th, 2019. The prosecution arrested criminal suspects A and B on a charge of murdering A’s husband for life insurance, and this incident has caused a stir in society. Insurance fraud exists in various forms, from small parts of everyday lives to murder. According to the Financial Supervisory Service (FSS), insurance fraud has increased by about ₩1.5 trillion since 2020, and it is growing. Therefore, the Sungkyun Times (SKT) would like to explain the current state of insurance fraud and the causes and possible solutions.
What is Insurance Fraud?
What Kind of Cases Are Insurance Fraud?
Insurance fraud refers to making unfair profits through insurance money or paying less insurance premium. For example, actions such as causing an intentional insured accident, pretending to be hurt and pocketing auto insurance, repairing vehicle damage that has nothing to do with an accident, and taking out insurance while hiding chronic diseases are all insurance fraud. In other words, gaining financial benefits after deceiving insurance companies and making them fall into an error is fraud. Insurance fraud is divided into “damage deception fraud” and “willful negligence fraud.” These two types are also classified as intentional or not in an insured accident: if someone intentionally exaggerates the scale, it is “damage deception fraud,” and if someone intentionally causes the accident, it is “willful negligence fraud.” Both cases are felonies, but “willful negligence fraud” is more severely punished; due to intentionality, this type of fraud not only charges insurance fraud but is also for injuring or killing a person. According to the FSS, among all kinds of insurance fraud, “forging accident damage” possesses 60.6% of the exposure of ₩943.4 billion, followed by “intentional accident” (16.7%) and “false accident” (15%). Unfortunately, the exposed cases of “intentional accidents” causing willful injury or murder have increased over the past four years: 36 people in 2018, 46 people in 2019, 72 people in 2020, and 97 people in 2021.
How Is Insurance Fraud Punished?
Nowadays, insurance fraud is punished under the Special Act on Insurance Fraud. In the past, judges punished insurance fraud under Criminal Code Section 347 (Fraud) because it was considered a typical fake pretense. However, due to the increase in damages and diversity in crime methods, the government separated insurance fraud from typical fraud and created a new law containing 16 clauses only for insurance fraud in 2016. The newly created Special Act on Insurance Fraud states, “Any violation of the act’s provisions is to be punished by a fine not to exceed ₩50 million or imprisonment not to exceed one year.” For better understanding, damage deception fraud can be referred to the Supreme Court pronouncement on December 10th, 2020. This precedent shows the suspect gaining ₩26.15 million through unnecessary treatments after nine minor car accidents from 2008 to 2016. This suspect was found guilty and sentenced to a fine of ₩20 million. Compared to damage deception fraud, willful negligence fraud is more complicated because of proving the intentionality of the accident. Willful negligence fraud can be referred to the High Court judgment in February 2018. It was a case of unlawful killing to get life insurance worth ₩200 million: the suspect A registered a marriage with C, who had intellectual disabilities. After the wedding, A takes out C’s life and indemnity insurance, keeping C’s state fake with his real lover, B. Eventually, A and B were sentenced to 12 years and four years imprisonment each.
Why Is Insurance Fraud Rampant?
Thinking of Insurance Fraud as a Small Matter
The most common reason for the occurrence of insurance fraud is the lack of knowledge and the social atmosphere taking insurance fraud lightly. Insurance fraud in daily life is usually related to hospitals. To gather more patients, hospitals commit crimes through cheaper treatment, such as forging medical certificates that cover the National Health Service (NHS). Most of the patients engage in a crime not recognizing this act as fraud - damage deception fraud and are sued by insurance companies unwittingly. For example, 50-year-old Mrs. Park said, “I once visited the local dermatology clinic because they advertised that they provide a cheap surgical procedure. After the payment, I found that it was not a discount but that they were writing the medical charts differently.” She added, “I didn’t know it was a crime at that time.” Moreover, this insurance fraud related to hospitals causes hundreds of defendants at most per case. With more defendants, there will be less moral sensitivity. If this situation continues, the social atmosphere of thinking about insurance fraud lightly will spread widely. Furthermore, the number of fake patients, who abuse insurance and pretend to be ill to gain insurance money, will also grow out of control.
Incompletion of Legal System in Investigation Processes
The disharmony between the authorities of criminal investigations is another reason for serious insurance fraud. The information exchange between the authorities should thrive on handling the illegal act. Mainly, because of the characteristics of life insurance, which occur in association with the NHS, good interaction between public and business insurance is necessary. However, the legal system is imperfect, so even the financial authorities cannot acquire the information they need during the investigation. Since the Korean government possesses a vast amount of personal data, the Personal Information Protection Act is strict; this is the primary block in insurance fraud investigation, making the investigation process longer and further unprotecting society. Willful negligible fraud mainly combines many charges, including murder, so the Financial Services Commission created a policy discussion body in January 2022. However, the Ministry of Health and Welfare, one of the lead positions, didn’t participate, implying that the country needs a change in the governmental system.
Solutions to Insurance Fraud
Intensification of Punishment
The punishment has to be reinforced to solve the social atmosphere that lightly perceives insurance fraud; likewise, the whole insurance sentence should be upgraded. The Special Act on Insurance Fraud Section 8 states, “Any violation of the act’s provisions is to be punished by a fine not to exceed ₩50 million or imprisonment not to exceed one year.” Compared to the past Criminal Code Section 347 (Fraud), the clauses expanded from two to more than 60 lines. However, the law needs additional clauses that definitize each type of insurance fraud and the degree of punishment according to the types. America, for example, punishes insurance fraud more severely than Korea; especially in New York, criminals are punished with up to 25 years in prison. Other states’ maximum penalties are also 20 years imprisonment. Not only in America but also in Singapore, culprits are punished sternly. In comparison, the incarceration rate is over 50% among final rulings, while the imprisonment rate in Korea is 25%. Within the intensification of punishment, crimes committed with the wrong idea of “Insurance is blind money” and the idea that “Insurance fraud is not a big deal” will vanish slowly. The whole of society will recognize which act is illegal and be the self-monitor protecting community.
Joint Countermeasure Force Arresting Insurance Fraud
A control tower, the core of information exchange, is necessary to solve the severe insurance offenses combined with murder, manslaughter, and assaults. This kind of organization will solve the lack of information networks during the investigation and propel the revision of the formal Personal Information Protection Act to make the investigation process more effective. According to Money Today, in April, political circles emphasized that the government should create a control tower and manage insurance leakage professionally. In January 2022, Yoon Gwan-seok, a member of the Democratic Party of Korea, suggested The Special Act on Insurance Fraud revision. He proposed the establishment of a whole governmental institute dealing with insurance fraud and the method of redeeming t h e illegal deposit. Lee Kil-won, a professor at Sungkyunkwan University, stated, “For the decrease in insurance fraud, we need a control tower. The continuous revision in law is also needed for a better country.” Insurance Fraud is a complex and severe crime, so all the organizations have to cooperate to solve the problem.
We should always recognize that insurance fraud is a severe crime that causes economic damage to many insurance applicants. Whether it is a penny-ante and minor offense or a serious criminal offense, they are all severe offenses. People should keep trying to change the social atmosphere. So, Kingos, let’s combine our efforts for a fraud-free society.