South Korea’s Financial Supervisory Service (FSS) has moved beyond its traditional supervisory role to actively coordinate criminal complaints by competing private insurers against a single hospital network – a development that reflects the scale of pressure fraud is placing on the country’s non-life sector.
The Chosun Daily reported on July 20, 2026, that the FSS proposed in early 2026 that four major property insurers – Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance – a file a joint complaint against Jaseng Hospital of Korean Medicine. The FSS identified irregularities in insurance claims from certain hospital branches and requested the four insurers to collectively submit materials to support a police investigation.
Acting on those complaints, the Financial Crime Investigation Unit of the Seoul Metropolitan Police Agency conducted raids in April on five locations, including the Jaseng Medical Foundation and Jaseng Hospital of Korean Medicine, on suspicion of violations under the Special Act on the Prevention of Insurance Fraud. The law carries penalties of up to 10 years imprisonment or a fine of up to 50 million won and was amended to extend liability to those who broker, solicit, or advertise fraud – not only those who commit it directly.
The insurers alleged that Jaseng Hospital indiscriminately prescribed herbal medicines to traffic accident patients where treatments were inconsistent with their symptoms. Police alleged that the hospital supplied traffic accident patients with herbal medicine prepared in advance at factories while presenting it as individually prescribed medication, with payouts reported as totalling hundreds of billions of won by The Asia Business Daily and tens of billions of won by SBS News. The complaints named 23 individuals, including the chairman of the Jaseng Medical Foundation and the directors of 21 Jaseng hospital branches across the country.
Jaseng denied the allegations in a statement issued the same day, saying it prescribes herbal medicine individually based on each patient’s symptoms, constitution, medical history, and diagnosis and that similar complaints from insurers had previously been dismissed by investigators, according to Korean-language reports by the Seoul Economic Daily. Investigators are analysing prescription records secured through the raids to determine whether an organized scheme was in place.
Jaseng describes itself as the largest network of hospitals for non-invasive treatment of spinal disorders in Korea, operating 21 hospitals and clinics with 30 specialized clinics, 400 physicians, and over 1,300 inpatient beds, according to its own website. The FSS also plans to investigate potential fraud tied to non-covered medical expense payback arrangements – where patients receive cash returns from facilities after inflated billing – at certain nursing hospitals.
The Jaseng case is unfolding against a backdrop of record fraud losses across South Korea’s private insurance sector. Detected insurance fraud reached 1.1571 trillion won (about US$770 million) in 2025, up 0.6% from the previous year, according to Financial Services Commission (FSC) figures. When undetected cases are included, the FSC estimates total annual fraud exposure at approximately 9 trillion won. Long-term non-life products accounted for 44.7% of detected fraud, while auto insurance represented 22.4%.
The fraud burden is being felt directly in loss ratios and premiums. By the third quarter of 2025, the cumulative risk loss ratio for indemnity health insurance had exceeded 100%, meaning insurers were paying out more in claims than they were collecting in risk premiums. Fourth-generation indemnity health insurance recorded the worst performance, with a loss ratio of 147.9%, according to the Korea Times. Premiums for first- through fourth-generation indemnity policies rose an average of 7.8% this year, and South Korea’s projected gross medical trend for 2026 stands at 13.5%, above the global figure of 10.3%, according to WTW. An FSC official said: “Such leakage of insurance payouts leads to higher premiums, and when insurance fraud involves claims for health insurance benefits, concerns rise about the depletion of the health insurance fund.”
The Jaseng investigation sits within a broader, coordinated enforcement push. The National Police Agency launched a nine-month special crackdown on insurance fraud running from Feb. 2 through Oct. 31, 2026, targeting organized car accident schemes and illegal medical institutions. The agency said: “Insurance fraud is a crime that undermines trust in the insurance system, which serves as a social safety net, and causes losses in insurance payouts, ultimately harming honest policyholders.” The Ministry of Health and Welfare has separately announced a crackdown on cancer care and Korean medicine hospitals billing non-insured treatments at 4 million to 9 million won per month. The convergence of action across the FSS, the National Police Agency, and the Ministry of Health and Welfare points to a multi-agency response to medical billing fraud that extends well beyond any single case.
Combating insurance fraud has been a stated priority of the FSS since Director Lee Chan-jin took office. During a national audit in October last year, Lee said: “I agree that penalties for insurance fraud are insufficient and plan to reinforce dedicated personnel.” Last month, Lee shared media reports on social media regarding payback-related nursing hospitals, instructing: “Such practices, which appear illegal, are continuing. Corrective measures must be taken.”
The FSS’s direct involvement in organizing joint complaints among four competing insurers – rather than leaving enforcement actions to individual companies – represents a notable use of the regulator’s coordinating role. Regulators have also identified a structural gap compounding the detection challenge: information sharing between financial sector bodies and social welfare agencies such as the National Health Insurance Service and the Health Insurance Review and Assessment Service remains limited, and the infrastructure needed to cross-verify data across these agencies has not yet been built out.
