A nurse and a doctor at a medical clinic in Daegu and two insurance firm sales representatives were indicted without physical detention last month. Also indicted were 94 people who falsely claimed insurance payouts.

All of them face charges of insurance fraud for their involvement in netting a combined 1.1 billion won ($802,743) in payouts between 2018 and 2021.

The clinic staff, according to the police, sent a portion of the payouts to patients registered as having undergone surgery or costly treatments in medical records they falsified.

The years of fraud were uncovered after a group of insurance firms filed a report with the police, suspecting orchestrated efforts by the small clinic that reported repeated cases of high payout claims for conditions that are not so common.

Expectations are growing that cases similar to this would become less frequent, deterred by the implementation of a new law governing the penalties for insurance fraud effective Wednesday.

The long-awaited revision allows financial authorities to refer potential cases for investigation at the first signs of attempted fraud. Previously, the actionable offense was claiming payout after defrauding someone.

Experts say the revision is toothless because it falls short of recovering fraudulent proceeds. Also lacking is tougher punishment for industry insiders as part of overall strengthened penalties, a measure long advocated by the insurance industry.

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"It is progress, but it is not enough," Korea Insurance Research Institute researcher Lim Joon said.

Penalties for insurance fraud are lenient compared to other types of fraud, in his view.

"The ceiling for the fine for insurance fraud was raised to 50 million won, up from the previous 20 million won. But insurance fraud does not lead to a prison term as frequently as non-insurance fraud does."

The Financial Supervisory Service revision will ban soliciting activities for the purpose of insurance fraud, including making suggestions online or in person to join a group to stage an accident or to falsify medical conditions or treatment records.

Postings on a website and social media accounts seeking potential fraud participants will be obtained and entered into evidence for criminal investigation.

Financial authorities will be able to request information related to individuals with the state-run National Health Insurance Service (NHIS) for insurance fraud investigations.

Reports of false claims or staged accidents will trigger an immediate investigation, corroborated by data provided by the health ministry-supervised, state-run NHIS and employment benefit system for previous track records.

"Insurance fraud is hard to identify, especially when organized with each of the gang members knowing exactly what to do to make it look like an accident or pass the scrutiny of insurance firms," he said.

According to the National Police Agency, the number of insurance fraud cases reached 1,600 last year, a slight increase from 1,597 in 2022.

The number of individuals detained in connection with the crime reached 6,044, a 24.6 percent increase from 4,852 the previous year. A total of 107 people were arrested, up 18.9 percent from 90.

Insurance fraud amounted to over 1.11 trillion won last year, a 26.7 percent increase from 880.9 billion won in 2019.