By Kang Seung-woo
An increasing frequency in fraud by insurance salesman has spurred authorities to enforce a no-tolerance policy, sources said Sunday.
Financial regulators are fine-tuning new regulations with the Justice Ministry that will allow them to revoke the license of insurance people involved in fraud and ban them from conducting business permanently.
This ``one-strike-and-you’re-out’’ scheme and other sanctions will be included in the revised bill for the insurance law the Financial Supervisory Service (FSS) plans to present to lawmakers soon.
In a dismal lack of foresight, the current regulations on insurance businesses provide no specific rules on the punishment of fraudulent activities, just vaguely stipulating that insurance salesmen should not commit them.
``Insurance salespeople who are punished for insurance fraud at one company can usually move to another with no problem because there is no system for sharing such information between the companies. Our plan is to weed out those without professionalism and ethics and kick them out of the industry,’’ an FSS official.
The move for stricter rules comes amid growing public backlash over a crippling insurance fraud scheme exposed in the small town of Taebaek, Gangwon Province, which involved 400 people and 14 billion won in unjust payments.
Residents and insurance salesmen in the city conspired to erode state healthcare coffers by faking or exaggerating injuries and making up accidents, police said.
According to the nation’s financial watchdog, a growing number of elaborate insurance frauds are being uncovered of late.
One case includes a fake accident report and a fake death certificate that were fabricated abroad to secure insurance money, while another concerns a fraudster pretending to suffer from amnesia.
Observers say that organized and massive insurance frauds most likely feature a sales worker or others in the industry.
“Insurance fraud has continued to evolve and salespeople who are quite familiar with complicated insurance policies and payment systems are possibly included,” said an official of the industry.
The recorded amount of insurance scams nearly doubled from 180 billion won (about $160 million) in 2006 to 330 billion won in 2009, according to the Korea Insurance Development Institute, but the agency expects the total amount including covered cases to reach 2.2 trillion won per year.
To counter this, financial authorities are about to come up with standards for in- and outpatients from swindle-prone car accidents, as well.