South Korea’s Financial Supervisory Service (FSS) returned 1.36 billion won in excess auto insurance premiums to customers identified as victims of motor insurance fraud in 2025, according to figures released April 20, as reported by ChosunBiz. The refunds went to 2,289 policyholders whose premiums had increased after claims later determined to be connected to fraudulent activity. The average amount reimbursed was about 600,000 won per person, the FSS said. The data indicate that fraud continues to influence premium levels for individual motorists.
Over the past five years, the watchdog has refunded an average of 1.21 billion won in overcharged premiums annually to about 2,540 auto insurance fraud victims. The refund mechanism is operated jointly by the FSS, the Korea Insurance Development Institute (KIDI), and non-life insurers. It reverses premium surcharges that were applied to customers who were subsequently classified as victims of auto insurance fraud.
Since the initiative was launched in June 2009, about 24,000 policyholders have received a combined 11.2 billion won in refunded auto insurance surcharges. The program sits alongside other anti-fraud measures such as investigations and underwriting controls as part of the market’s response to fraudulent activity in the motor line. The FSS said: “We will continue efforts to ensure that relief for insurance fraud victims is fully carried out, including promptly refunding surcharged premiums to victims of auto insurance fraud.”
The FSS is also changing the treatment of long-outstanding refund amounts. Under a new arrangement, any surcharges that remain unclaimed for more than 10 years will be transferred to the Korea Inclusive Finance Agency (KINFA). Non-life insurers will first notify identified victims of their eligibility and the details of the refund. Beginning next month, amounts still unclaimed after the 10-year period will be sequentially granted to KINFA. The measure will centralize the handling of dormant surcharges and long-standing refund obligations within a single institution.
The transfer framework alters the way historical surcharge-related liabilities and unclaimed balances are managed. The change may require adjustments to internal procedures for tracking legacy surcharge cases, documenting outreach efforts, and reconciling accounts once funds are moved to KINFA. The FSS noted that some refunds have not been completed even when insurers provide guidance to affected customers. In a number of cases, policyholders cannot be reached because contact information is outdated, or they decline or do not respond to calls and notices. As a result, eligible refunds can remain unresolved for extended periods, prompting the move to shift long-dormant amounts to the inclusive finance agency.
The surcharge refunds come against the backdrop of another record year for fraudulent insurance claims across the Korean market. Data released by the FSS on March 31, cited by The Korea Times, showed that insurers paid out 1.16 trillion won in fraudulent claims in 2025 – the highest level on record. The figure was up 6.9 billion won, or 0.6%, from the previous year, continuing an upward trend in the total monetary value of detected fraud.
Insurance fraud losses amounted to 1.08 trillion won in 2022 and 1.12 trillion won in 2023, according to the watchdog. The pattern points to a gradual increase over the three-year period. The totals cover wrongful filings across lines of business including non-life and life insurance. While the aggregate fraud amount rose, the number of individuals suspected of involvement in insurance fraud decreased. Approximately 105,700 people were identified as suspects in 2025, down 3% from a year earlier. The combination of higher losses and fewer suspects indicates an increase in the average loss per suspect and may have implications for how insurers and authorities prioritize investigative resources.
The FSS has said it will step up measures to detect and deter fraudulent claims in cooperation with other agencies, including the police. The supervisory focus spans both preventive measures in underwriting and claims handling, and post-claim responses such as investigations and recoupment where possible. The latest data and supervisory moves keep fraud risk management, data-sharing initiatives, analytic tools, and cooperation with KIDI and law enforcement on the agenda.
At the same time, the continued operation of the auto surcharge refund scheme reflects regulatory attention to how fraud-related incidents affect premium levels for policyholders who are classified as victims rather than perpetrators. As fraud levels and enforcement activity evolve, market participants face ongoing questions about how to calibrate claims scrutiny, manage customer communications, and address cases where policy terms or pricing have been influenced by fraudulent conduct involving third parties.
