Insurance Frauds: Whose fault, who pays?
By Neeraj Mahajan
If the insurance industry is to
be believed, a serious issue affecting their operation profitability is fraud. Nearly 6% of all insurance claims in India are
fraudulent accounting
for a loss of between Rs.2,500-3,500 Crore to the insurance companies every
year. But is that a justification to hang the 94 %
people who have caused no
harm? If the insurance company makes a loss on one count, it covers it up by profits
from other business activities. But in the name of loses – does the insurance
company have a right to unjustly deny paying compensation to a poor widow – who
after losing the sole breadwinner in the family has to beg to bring up her
children and still save enough to pay a lawyer 18 long years? Is this justice
and fair-play?
There is a saying you have to know the law to break
the law. This holds true for the insurance companies who know the law like the
back of their hands and use that knowledge to unjustly deny even genuine
claims. Another dimension to this problem is that in most cases no fraud can
happen unless an insider is involved and provides all the necessary backend
support for committing the offense. Invariably, there is an employee or insider
involved who knows the loop-hopes and induces or gets indoctrinated the
beneficiary to take part in the crime. Most frauds involve a team-work of
agents, brokers, insurance employees, bankers, lawyers, beneficiary and other
stakeholders of the general insurance system.
It is not
necessary, that the policy holder always bribe surveyors and officials
Fraud can occur at time of buying, underwriting stage
or later as a post-policy claim. In the pre-policy stage the agent is the main
conduit who is interested only in his commission so he may advise the client to
suppress information which may lead to extra premium or denial of policy. This
is part of his customer service. Post insurance stage involves
misrepresentation to pass on a benefit to a person not otherwise eligible to
receive it a manipulated or exaggerated claims. One such practice is to have
paper accidents in which documents are created in collusion with various
authorities to fake an accident and claim compensation.
One of the most common modus operandi of Third Party
frauds in India involves conversion of ordinary death or other accidental death
into Hit and Run case or replacement of vehicle in a hit and run case with the
help of insider and the local police. In some cases it was found that the
person making the claim changes but all the other details remain the same. It
was found that the same vehicle was involved in 18 different accidents, all in
the same city and the same years.
A "dirty
secret" that no one talks about openly is that in many case people working
for insurance companies, sell information about customers involved in accidents
to an advocate who then encourages them to make the claims. The modus
operandi is simple – the advocate immediately contacts the relatives of the
deceased or injured and offers to complete the necessary documentation to lodge
an MACT case on behalf of the victims' relatives. He also settles an amount to
be shared after the claim is received. A few years ago the CBI registered a case against an Ambala
based Advocate for insurance frauds to the tune of Rs. 200 Crores. A typical
fraudulent case may involve say a case of death due
to negligence which may be converted to an accident caused by another vehicle or
an accident caused under influence of alcohol which may be shown as accident
caused by another vehicle, substitution of un-insured vehicle with a insured
vehicle or claiming compensation for the treatment to an injury sustained in
vehicle accident. Most such claims are only possible with the connivance of
insiders in the insurance industry.
(To be continued)
Also Read:
Motor Vehicle Insurance: Taking people for a ride… Part 1
Motor Vehicle Insurance: Taking people for a ride…2
No comments:
Post a Comment