BUSAN — The Busan District Court has sentenced a man in his 20s to two years in prison for orchestrating a sophisticated insurance fraud scheme using generative AI technology to forge medical records and illicitly claim hundreds of millions of won in payouts.

The Mechanics of AI-Driven Forgery
According to the ruling handed down by Judge Sim Jae-nam of the Busan District Court’s Criminal Division 3, the defendant, identified as A, was charged with violating the Special Act on the Prevention of Insurance Fraud.

The court found that between July 2024 and mid-2025, A successfully defrauded insurance companies on 11 separate occasions, pocketing approximately 150 million KRW (approx. $112,000). A’s modus operandi involved a clever manipulation of modern technology: he photographed legitimate hospitalization and outpatient certificates he had previously received from a hospital in Busan and uploaded them to ChatGPT.

He then prompted the AI to "extend the duration of the hospital stay" or alter specific dates to maximize his claims. The AI-generated files depicted A as a patient suffering from chronic fainting and dizziness, providing him with the documentation necessary to file fraudulent claims.

 
Expanding the Fraudulent Network
The investigation revealed that A did not act entirely alone. He expanded his scheme by involving an acquaintance, identified as B. In one instance, A used the same generative AI method to create a false narrative that B had suffered a rupture during a soccer match. The AI produced a convincing file stating that B required 25 days of treatment, which was then used to claim additional insurance payouts.

For his participation, B was sentenced to 10 months in prison, suspended for two years.

Judicial Warning Against AI Misuse
In delivering the verdict, the court emphasized the gravity of the offense, noting that the nature of the crime was particularly malicious.

"The defendant systematically deceived insurance providers to embezzle a significant amount of money," the judge stated. "Considering that no settlement has been reached with the victimized insurance companies and the criminal methods involved were highly sophisticated, a custodial sentence is unavoidable."

A Growing Trend in Digital Crime
This case marks a significant milestone in South Korean judicial history as one of the first major sentences involving the direct use of generative AI for document forgery in a criminal context. Legal experts warn that as AI tools become more accessible, the barrier to committing high-level forgery is dropping significantly.

The Financial Supervisory Service (FSS) has recently noted a sharp rise in insurance fraud involving digital manipulation. Data from 2024 showed that insurance fraud reached a record high of 1.15 trillion KRW, with authorities increasingly deploying their own AI-based detection systems to counter the "technological arms race" between fraudsters and investigators.

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