Insurance scams aren’t funny

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Insurance scams aren’t funny

The picture of a Korean car slamming into a Lamborghini on a road in Geoje Island, South Gyeongsang, raised a buzz among Korean Internet users. Messages of sympathy poured out for the driver who caused the accident after it was reported that the repair bill for the Italian luxury car could reach 140 million won ($124,600) - on top of a 2 million won daily rental bill. But an insurance company investigating the accident got suspicious and finally accused the two drivers of staging the accident for profit.

Insurance fraud is getting bolder. Car crashes that are staged in order to cash in on insurance money are a familiar scam in the car insurance industry. The scammers decide on who will be the hitter and who gets hit and share the insurance money. The Lamborghini accident was a particularly exotic example.

Registered insurance frauds have exceeded 2 trillion won over the last five years. The number has picked up recently to 280 billion in the first half of 2014, compared with 220 billion in the same period in 2012. Over 80,000 people are convicted every year for insurance fraud. The cases have become more sophisticated and violent. One person feigned a car accident to kill a spouse for life insurance money. Another was caught running a bogus medical clinic. Some even recruit people to stage car accidents through online social networking platforms.

Insurance fraud is sometimes shrugged off because insurance companies are generally considered to make easy money. But the damage from insurance frauds hurts customers as much as the company. According to the Korea Insurance Research Institute, damages paid out in false insurance claims are estimated to reach 3.4 trillion won a year as of 2010. The sum is tantamount to 12 percent of the 27.4 trillion won total annual insurance payout to subscribers.

Insurance schemes are too lightly penalized. Only 25 percent receive jail terms and 65 percent are freed after paying a fine. Some U.S. states even punish people planning scams - even if they are not carried out. German law enforcement authorities slap heavy criminal penalties on insurance scams. The people involved in the Lamborghini incident will likely to get off the hook with a fine of around 1.5 million won.

The judiciary must be sterner with insurance frauds. Tougher laws are needed to include insurance schemes in the category of fraud. Tougher laws and investigations would make people think twice about cheating insurance companies.

JoongAng Ilbo, March 21, Page 26

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