Dental insurance scheme nets W2.2b through falsified records, fraudulent claims

Dental clinic staff and insurance agents who exploited loopholes in dental insurance policies to fabricate medical records and collect fraudulent payouts have been indicted.

The Seoul Southern District Prosecutors' Office said Friday that its Criminal Division 2, led by chief prosecutor Ki No-seong, indicted 17 people on charges of violating the Insurance Fraud Prevention Act and the Medical Service Act. Two hospital managers and one insurance agent were detained and indicted; two dentists, one clinic counseling director and 11 insurance agents were indicted without detention.

The defendants carried out the scheme between August 2020 and April 2024, steering patients into purchasing multiple dental insurance policies and then issuing false treatment certificates to file fraudulent claims. The total amount of illicitly obtained insurance payouts reached approximately 2.2 billion won ($1.53 million).

Prosecutors determined the case was an organized fraud involving 46 insurance agents, six dental clinic staff members and more than 200 patients, each playing a distinct role.

The scheme began when insurance agents recruited patients and referred them to dental clinics. The clinics then manipulated patients' medical records or issued false treatment certificates to maximize insurance payouts. Patients used those documents to file claims with insurers.

Some clinics deleted the date of a patient's first visit from their records to conceal treatment received before a policy took effect, or inflated the number of teeth treated. They also deleted panoramic dental X-rays to evade scrutiny during the claims review process.

Patients enrolled in multiple dental insurance policies and collected payouts using the falsified documents, with some of the money going back to the clinics as payment for treatment. The clinics in turn paid roughly 30 percent of the fraudulently obtained insurance money back to the agents as kickbacks.

Dental insurance policies do not specify a per-tooth coverage limit for restorative procedures such as resin fillings and inlays — a gap the conspirators deliberately exploited in designing the scheme.

The case is an example of prosecutors reopening a matter in which police had declined to recognize some of the charges, ultimately exposing the full extent of the wrongdoing. Police had originally forwarded the case involving 78 suspects — including clinic staff member A and dentist B — on allegations that they conspired with insurance agent F to manipulate medical records and defraud insurers.

When prosecutors asked police to supplement the evidence and specify the criminal facts, police closed their investigation without further inquiry, citing insufficient evidence. Prosecutors then ordered police to forward all suspects who had not been referred and conducted their own follow-up investigation, analyzing personal and nominee bank accounts, performing mobile phone forensics, securing recordings and re-interviewing suspects.

That investigation confirmed that A and B had conspired with insurance agents to create false medical records and distribute a portion of the fraudulent payouts to the agents. Prosecutors directly detained A, who led the scheme, and insurance agent F.

In a separate dental clinic case, prosecutors also found that dentist C, whom police had identified as the clinic's director, was in fact only a salaried physician, and that counseling director D — a non-medical professional — had established and operated the clinic, making it what is known as a "director-run clinic."

Through re-interviews of clinic staff, on-site checks and a review of administrative documents related to the clinic's establishment, prosecutors confirmed D was the actual operator, added charges under the Medical Service Act and detained D directly.

Prosecutors also found evidence that insurance agent F, who first devised the scheme, had hidden a mobile phone during the police investigation and pressured co-conspirators to retract their statements and coordinate their testimony.

"By clearly establishing the illegal medical practices, we have prevented further crimes and harm," a prosecutors' office official said. "We will respond firmly to insurance fraud and medical crimes that pose a direct threat to public safety and health."