The National Assembly of South Korea has passed a significant amendment to the Special Act on Prevention of Insurance Fraud, a move aimed at enhancing the capabilities of financial and investigative authorities, as well as insurance companies, in tackling the increasing sophistication and organisation of insurance fraud.
With the new law, individuals who are involved in brokering, enticing, soliciting, or advertising insurance fraud will face penalties equivalent to those who commit the fraud directly. This includes a prison sentence of up to 10 years or a fine of up to KRW50 million (approximately $37,427). Previously, the law only penalised those who committed fraud or assisted others in committing fraud.
Furthermore, a Pulse News Korea report revealed that the amendment introduces the possibility of imposing fines equivalent to the amount of illegally gained funds, in addition to prison sentences, for those found guilty of insurance fraud.
The revised law also empowers the Financial Services Commission to combat insurance fraud more effectively. The commission now has the authority to request relevant information from administrative bodies, insurance companies, and telecommunications operators. Non-compliance with such requests can result in a fine of up to KRW5 million, thereby increasing the law’s enforceability.
Additionally, the law includes provisions to protect victims of insurance fraud. For instance, in cases where insurance fraud is committed in relation to an automobile accident, the new law mandates that insurance companies must inform the affected driver and refund any increased premiums resulting from the incident.
However, the amendment did not include provisions for harsher punishments for insurance industry insiders who participate in fraud, nor did it mandate the reimbursement of insurance payouts upon a fraudster's conviction.
According to data from the Financial Supervisory Service, insurance fraud in South Korea has reached a new high, with detected cases surpassing KRW1 trillion in 2022, amounting to KRW1.08 trillion and implicating over 100,000 individuals.
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