Insurance Attorney | Defending a Client Charged With Insurance Fraud and Obtaining a Fine

The Special Act on Prevention of Insurance Fraud is a statute enacted for the purpose of governing matters concerning the investigation, prevention, and punishment of insurance fraud, protecting the rights and interests of policyholders, the insured, and other interested parties, and contributing to the sound development of the insurance industry and the promotion of public welfare.

Here, an insurance fraud act means the act of deceiving an insurer as to the occurrence, cause, or content of an insured event in order to claim insurance proceeds.

A distinctive feature is that this Act applies in preference to other statutes with respect to the investigation and prevention of insurance fraud and the punishment of those who commit it.

According to the financial authorities, the amount of 🔗insurance fraud detected last year was 1.1164 trillion won, a 3.2% increase from the previous year. The number of persons detected was 109,522, a 6.7% increase from the previous year, reaching a record high.

In response, an amendment to the Insurance Fraud Prevention Act took effect this past June. Following the amendment, the Sentencing Commission of the Supreme Court significantly strengthened the standards for fraud, and it is predicted that more severe punishment will be imposed for violations of the Special Act on Prevention of Insurance Fraud.

This amendment to the Insurance Fraud Prevention Act is the first since its enactment in 2016, made after eight years, and its main thrust is the punishment of the brokering and advertising of insurance fraud and the strengthening of the financial authorities' investigative powers.

Its main provisions include the prohibition and punishment of acts such as brokering, soliciting, and advertising insurance fraud, as well as ▲the financial authorities' right to request deliberation on and a corrective demand against the brokering, soliciting, and advertising of insurance fraud, ▲the financial authorities' right to request materials from relevant administrative agencies and information and communications service providers, ▲notification of the facts of harm to policyholders whose premiums have been increased due to automobile insurance fraud, and ▲the establishment of standards for reviewing the appropriateness of hospitalization.

A person who acquires insurance proceeds through an insurance fraud act, or who causes a third party to acquire insurance proceeds, may be punished by imprisonment for not more than 10 years or a fine of not more than 50 million won.

In the case of a habitual offender, the sentence may be increased by one half, and an attempted offender may also be punished.

If the amount of profit from the insurance fraud is 500 million won or more but less than 5 billion won, the offender is subject to imprisonment for a definite term of three years or more, and if it is 5 billion won or more, the offender is subject to life imprisonment or imprisonment for five years or more.

The investigative agency suspected insurance fraud on the ground that the client had used a long-term rental vehicle.

This was because, in the case of a rental vehicle, there is no burden such as an increase in premiums when an accident occurs, and as long as the deductible is paid, there is no harm to the user's own funds beyond that.

In response, the insurance attorney rebutted that the client, being in difficult financial circumstances, could not afford to purchase even a used vehicle, and pointed out that the investigative agency had reached an erroneous conclusion by overlooking the client's financial situation.

The insurance attorney argued that, in order to raise a young child, the client had no choice but to use even a long-term rental vehicle.

The investigative agency suspected insurance fraud on the ground that the client had recently been involved in numerous traffic accidents and had received insurance proceeds.

In response to the investigative agency's argument, the insurance attorney argued that the client's accidents did not display the features of insurance fraud traffic accidents.

In the case of automobile insurance fraud, it is most often carried out against other drivers who appear to have violated traffic regulations at a particular location.

The insurance attorney emphasized that no such circumstances were present at all in the client's accidents and argued that this was not insurance fraud.