Korea's car accident insurance merry-go-round policies support recurring insurance fraud

By Yoon Ja-young

About two decades ago, I had a car accident. I had gotten my driver's license a few years before, but the license was just kept in a drawer as I wasn't sure about my driving skills. Eventually, I decided that it was time I should start driving, and booked some hours of driving lessons with a tutor.

During one lesson, another car crashed into the car I was driving at a crossroad. The insurance companies later decided that the other driver was 70 percent liable and I was 30 percent liable, but that didn't matter much to me. I thought it was my fault since anyone driving on the road by oneself is supposed to be better than someone who is taking a driving class.

The other driver ― a middle-aged lady ― as well as my driving tutor and I were all at a loss and didn't know what to do. We just got out of the cars and looked at the damage. It was a quiet road with only a few, if any cars or passersby.

Then out of the blue, an ambulance and wreckers arrived. I was wondering how they found out about the car accident since none of us had made a phone call, as far as I knew. The ambulance driver came to me and asked if I was okay. I said I was fine. The driver asked again if I was really okay. I said I was really okay. My right knee had hit below the steering wheel so it did hurt but I wanted to minimize the scale of the accident. Then the ambulance driver pulled me aside to have a more private conversation.

“Look. It seems you were having a driving lesson and the tutor's car has been damaged. Don't you think there should be some compensation from the insurance?”

Half convinced by the ambulance driver, and half due to the concern that I might have been hurt more seriously than I thought, I got in the ambulance, with my tutor as I remember. I don't know where the other driver ― the middle-aged lady ― went. By that time, officials from insurance companies had arrived and were handling the details, so we could leave.

We were transferred to a small hospital. I got some X-rays and the doctor checked me and asked for how long I wanted to be hospitalized. So it was me, not the doctor, who was to decide how many days of hospitalization I need. If I wanted to stay there for a month, I could, and the insurance company would pay all medical costs. I chose not to be hospitalized, though.

I am not saying that people should refrain from hospitalization after being in a car accident. Even if you seem to be okay immediately after the accident there can be aftereffects that don't appear until later so people are generally advised (by neighbors, friends, colleagues, or anyone they know) not to hurriedly sign and close the deal with the insurance companies.

Still, the experience gave me a glimpse into how insurance money can be wasted. Drivers or passengers or pedestrians get hospitalized for longer than they need (in some cases perhaps even unnecessarily), and get compensation for the lost days of work, from the insurance companies involved. Doctors get paid by the insurer for the medical procedures, which can sometimes be excessive. The ambulance driver probably is paid by the doctor for having brought the “customer.”

Things could be somewhat different since my experience was some 20 years ago, but it seems that the old problems related to insurance persist. The Financial Supervisory Service and the Ministry of Land, Infrastructure and Transport have been examining around 500 hospitals around the country since June, jointly with local governments and the General Insurance Association of Korea, to monitor patients hospitalized after traffic accidents. They are examining if the hospitalized patients were really staying there, as some hospitals, specializing in car accidents, are operating in such a manner that patients can freely come and go ― even sleeping off-site ― which could be construed as proof that they don't need hospitalization at all.

According to the Korea Insurance Research Institute, hundreds of billions of won in car insurance money is wasted through such fraudulent practices, as patients receive unnecessary or excessive treatment. The ratio is especially high among Oriental medicine hospitals where the fee for doctor's practice is not set as strictly as in Western medicine hospitals. We all eventually have to pay for such fraudulent practices, as insurance premiums rise.

The writer (yjy@koreatimes.co.kr) is finance editor of The Korea Times.