South Korean police said Tuesday they were investigating 27 North Korean refugees for swindling private insurance firms out of hundreds of thousands of dollars in bogus medical claims.

Police said the refugees faked illness in collusion with hospitals to claim a total of 1.04 billion won ($909,000) from insurance firms between 2007 and 2010.

While listed as hospitalised, they frequented saunas, restaurants and even nightclubs. The scam also involved a 71-year-old doctor and five hospital employees who conspired with the refugees to claim a separate 104 million won from the state health insurance agency, police said.

Police are also investigating two brokers on suspicion of helping the refugees send some of the proceeds to relatives in the North.

Fraudsters involved in medical insurance rackets have previously made use of North Koreans. In 2008, police charged 41 refugees involved in bogus medical claims.

More than 23,500 North Koreans have settled in the South since the 1950-53 war. They get government financial help along with job education but many fail to adapt to their new environment.