High Rise in Insurance Fraud

Insurance fraud has drastically increased during the first half of 2005, according to the Financial Supervisory Service’s statistics presented to Uri Party lawmaker Kang Kil-bu from the National Policy Committee. The document submitted for parliamentary inspection showed that the number of cases of insurance fraud was 10,676 amounting to 82.4 billion won.

The figure is even larger than that of 2003, when 9,315 cases amounting to 60.6 billion won were prosecuted. If the current situation continues, the figure for 2005 is expected to well exceed the last year’s number, 16,513 cases amounting 129 billion won, which was the largest in history.

By category, changing drivers recorded the largest number, 2,917, followed by exaggerating the damage (2,275), faking accidents (1,822), and intentional accidents (1,074).

Also, 91.5 percent (9,773 cases) of the total insurance fraud cases was related to non-life insurance, while only 8.5 percent (or 903 cases) was life insurance.

However, the fraud amount per life insurance case was 21 million won on average, more than three times larger than that of non-life insurance, six million won. This is perhaps because many life insurance accounts deal with a large amount of money.

For the first half of this year, 2,696 insurance fraud offenders were caught. The age group with the largest number was the 20s (1,051) followed by the 30s (652) and the 40s (586). Among them even included 110 teenagers.

“Such a high increase was due to the dire living condition caused by the economic stagnation and stronger attitude of people who want to make one-time big money with no efforts,” explained Jang Sang-yong, the chief of insurance inspection of the Financial Supervisory Service.

Rep. Kang pointed out that the increase in insurance fraud would worsen the business of insurance companies and lead to an increase in the insurance bill, consequently imposing a wrongful burden on honest applicants. “The inspection on insurance fraud should be more strengthened,” said Rep. Kang.

Jin-Young Hwang buddy@donga.com